When the known and the unknown worlds collide, will fans still buy music?
Bruce Warila | Wed, June 10, 2009 
Watching the capacity crowd pouring enthusiasm (love and money) into the Nine Inch Nails show last week (not shown in the image above), reminds me once again that no artist should believe they need much more ‘enthusiasm’ than that.
The Known World...
Somebody also told me last week that there are 2,000 artists that generate at least $5,000,000 in revenue per year EACH ($10,000,000,000 combined annually). That number sounds a bit high, so even if we cut it by 50% ($2,500,000 each), the Known World is still a world that many artists would love to join. As of today, 99.99% of the artists in the Known World are still affiliated with a major label and most have probably obtained mass-market recognition through terrestrial radio.
The Unknown World…
The Unknown World is simply comprised of everyone else; they are the millions of relatively unknown, independent artists making over 1,000,000 songs a year. Some small percentage of these songs (far less than 10,000 - all languages/all genres?) is comprised of songs that are just as good as every song produced by Known World artists.
The Middle World…
This is the part of the industry that is referred to as the new ‘middle class’. In Lucas Gonze’s recent post “don’t know that band, nope”, he calls artists in this world “blockbuster microbands”. In this post, I’m just going to speculate that as the Known and Unknown worlds collide, Middle World artists will see a significant drop in music revenue.
Take me. Share me. Play me please…
It’s obvious to everyone, that there are millions of unknown artists with millions of songs standing on the sidelines screaming to get into the Known World; it’s always been this way. Now over the last 24 months, it’s become common practice by those that advise independent artists (including myself) to recommend some sort of free-song strategy; as a consequence, lots of artists are simply giving away music; presumably as part of a strategic solution to obtain entry into the Known World.
The Collision…
When ten thousand free, just-as-good songs (about 600 hours of listening time - created annually) find a mass-market of receptive (key word here) music consumers, the Unknown World is going to sponge up a lot of the ‘enthusiasm’ that fans previously allocated to Known World artists. It makes me wonder: with 600 hours of just-as-good, free music available, will music fans still buy music?
Causes of the collision…
For the collision to occur, two things have to happen (let me know if I am missing something). First, the ability to sift, sort and filter the needles out of the haystack has to reliably work (this is coming). But (second), just finding the just-as-good songs isn’t enough. Every song needs repetitive, mass-market exposure to generate the deep and broad imprinting that needs to occur to propel an artist into the Known World club.
The perfect disruptive business…
Here’s a quote from Fred Wilson’s presentation on disruption: “if you have a business that will shrink an existing market, allowing you to take $5.00 of revenue from a competitor for every $1.00 you earn, let’s talk!” The perfect disruptive business in this industry combines the following: free-sorted-sifted-just-as-good music coupled to repetitive mass-market exposure (for each song), combined with minimal overhead and zero legacy music industry legal friction.
I think it’s possible to create the business I just described, and this is the reason why I don’t get excited about businesses that intend to sell music (now yes, future doubtful). There are just too many artists with lots of just-as-good songs that deserve to be in the Known World club, and when you combine this fact with enabling technology and smart execution, you get truly disruptive businesses.
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Reader Comments (10)
Now that the tools of excellent production have been released to the masses, along with a distribution channel...
The HAS to be a leveling. The future belongs to those who can produce the goods, and MARKET themselves well.
There was never a shortage of talent able to write and perform excellent pop music. Never.
There was only the barrier of no access to recording technology and distribution.
And radio play for "imprinting" as you point out.
The need for multiple listens to imprint a tune on the brain is still going to be a barrier. But I think with diligent, intelligent marketing, it can be overcome.
Glenn Galen
Minnepolis
http://www.ReverbNation.com/glenngalen
Excellent post.
I'm not sure that the barrier of entry (i.e. access to more loyal fans) for artists lies somewhere between $0 - $0.99. Radiohead, NIN, Prince etc. can turn almost any initiative into gold because of who they are and, more importantly, everything they have done up until this point.
A free download today is what a full stream (vs. 30sec stream) was five years ago. What's next? Even free-er?
'Free' is not disruptive if everyone does it.
The ultimate effect of the Internet will be to shrink the money in the Known world greatly, but it will also greatly expand the money in the MIddle world. Time will tell, but I expect the total revenue generated from all of music will expand after this transition since many new listeners will be created.
Another issue is historical music. This is a core problem. I believe the RIAA is trying to suppress historical music by extending the copyright period, making the music hard to get to, and never lowering prices on it. They view this music as competition to the new acts where they have absolute control over the contracts.
The long term answer is to let recorded music be free for all non-commercial uses. This will level the playing field and greatly increase the importance of live performance. Live performance is great for musicians since they keep most of the revenue from it. The RIAA has no purpose in this new world, but they won't go away quietly.
I can't figure out how 2000 artists can each gross $50 million. According to Billboard, the 10th best grossing tour for 2008 was Rascal Flats with $55.8 million.
There is, of course, other income than from touring, but most successful bands make the bulk of their income from touring. Still, I can't imagine how 2000 acts can generate $50 million each from a combination of CD sales, ticket sales, and merchandise. Even if you calculate based on retail price of CDs sold, would that work out to $50 million for 2000 artists?
If bands are generating that much money for someone, I would think the industry would be booming and there would be lots of investors willing to front bands or music companies.
http://www.billboard.com/bbcom/news/bon-jovi-scores-2008-s-top-grossing-tour-1003921575.story
Suzzanne,
I don't have the actual numbers. My source is pretty up on things. I cut the number by 50%. However for all revenues combined, it's not hard for me to believe that that top 2,000 artists generate the lions-share of the $10,000,000,000++ (global, all revenue sources) that I mentioned above. There's plenty of evidence out there that demonstrates that the top artists (the top 2% to 5%) generate the bulk of the industry's revenue..
-B
My guess is that the $10 billion is not evenly divided among those 2000. That's what threw me. You have someone like Madonna at the top. Then you have the rest of the top ten. And probably after the top 100, there's relatively little being generated by the next 1900. And then beyond that perhaps not much that is even measurable.
The reason it caught my attention is that I am doing music business plans right now. Having a band that can gross $1 million a year is doing quite well. If you can show investors that kind of money, you are likely to get them to participate. If you can show them that you are running a $50 million a year company, you can talk to very serious investors. But there just aren't that many bands that do that. I suppose if you factor in the profits of all the radio stations and the clubs where those bands play, then you might hit better numbers, but everyone's piece of that pie is very small. That's the challenge. We're looking at a music industry where most companies are trying to collect pennies per artist. That's a hard model to make work.
I use to have the same exact thoughts - "not much generated after the top 100".. I have seriously reconsidered that position over the last few months. First, think globally. Then look at all the genres. Then think about all the legacy artists / entertainers (think Barry Manilow). I need to find some hard numbers to know for sure. However, enough people have pushed me out of the "not much generated after the top 100" camp that I am tilting in a new direction.. Let me know if you come up with anything, and likewise - I will post whatever I find..
I don't think I know where to look to find 2000 artists who generate $50 million each. Both Forbes and the LA Times have compiled lists of the top grossing artists (factoring in income from all sources). Here's what I found from the LA Times (1/13/09). The paper had a top 20 list and these were the numbers for 11-20.
Neil Diamond ($70.5 million), Taylor Swift ($62.2 million), Michael Bublé ($59.5 million), Metallica ($56.4 million), Carrie Underwood ($54.9 million), Dave Matthews Band ($51.6 million), the Police ($51 million), Lil Wayne ($50.8 million), Tom Petty ($50.5 million) and Kid Rock ($50. 2 million).
http://latimesblogs.latimes.com/music_blog/2009/01/madonna-acdc-an.html
This chart suggests that revenue for the global music industry will be $65 billion in 2009.
http://www.emarketer.com/Reports/All/Emarketer_2000428.aspx
2000 artists times $50 million each would be a total $100 billion, which would be almost twice the estimated amount of that chart and doesn't include the hundreds of thousands of other artists also making music. Or is my math off? Or is your source talking about some income not reflected in the global music industry chart? I'm really intrigued by this because I can't get the numbers to work for me.
Hi Suzanne,
Wow am I embarrassed.. I could not figure out why were not on the same page. I kept using 10 billion. You were adding up to 100 billion due to my additional ZERO. Super sorry about that. I usually double check my numbers. I fixed the error. Right you are 2,000 times 50,000,000 does not equal 10 billion. Ouch.. $5,000,000 is the number.
Cheers,
Bruce
Yes, that works for me. I can see it. Like I said, I was doing a business plan for an artist to figure out how to get her to an annual gross of $1 million. Without bothering to go into great detail, I calculated that it could be done with about 30,000 to 40,000 fans around the country, spending between $10 - $100 a year on music purchases related to that artist.
So an artist that has 200,000 fans (not just listeners, but fans who buy something every year (a ticket, merchandise, music) should be able to gross in the $5 million range, more or less.