Marc Geiger, William Morris Endeavor head of music (left), with Billboard editorial director Bill Werde during a Billboard FutureSound Conference keynote Q&A. (Photo: Arnold Turner)
William Morris Endeavor head of music Marc Geiger said global scale and rising targeted advertising rates are going to put music streaming and subscription services like Pandora and Spotify in the black, if they can survive their steep start-up costs. The global audience has changed the parameters of the game, he said.
The veteran artist manager and concert promoter who helped found Lollapalooza was extremely candid during his morning keynote interview with Billboard editorial director Bill Werde at the second annual FutureSound Conference on music and technology in San Francisco.
Geiger said a royalty system tiered for scale might allow companies like Spotify and Pandora to survive long enough to reach profitability. Right now, new streaming companies are saddled with royalty rates more in line with mature businesses, even though the space is in its infancy.
Making a sports analogy, Geiger said, "We're not even out of the locker room yet."
Mature subscription services should probably be keeping 25 to 30 percent of revenue, similar to Apple's iTunes store, he said. "I think that will be an industry standard. If you don't hit scale, that's not enough."
Geiger also said music labels are undervalued.
"Music labels are going to be a $200 billion business. When you look at scale today you just add two zeros, and I think that makes up for a lot of mistakes businesses can make," he said. "Between advertising revenue, music subscriptions and unit sales, I think you're going to have a hugely successful business."
Over the past couple of years, Geiger - ranked no. 21 on Billboard's Power 100 last January - booked Roger Waters' "Wall" tour and helped launch the Identity Festival, an ensemble tour of electronic dance music acts that hoped to capture the burgeoning suburban audience for techno.
Geiger said he has high hopes for the future of electronic dance music in the U.S., and said the recent poor-selling Avicii tour helped deflate any bubble: "We experienced a market correction," he said. "The hype never got out of control. ... I don't think there will be a crash."
However, he said he has a poor outlook for rock, potentially tied to the decreased dominance of commercial radio and major-label control over consumer attention.
"I don't see growth in the rock sector," Geiger - who has managed and worked with many rock acts over the years -- said. "Part of it is because the music's not that good."
Speaking as someone whose ArtistDirect company - which he cofounded in the late 1990s - Geiger cast a grim light on the currect state of innovation, saying neither the labels nor the tech community are taking charge.
"I think we're in this boring middle period," he said. "Nobody is leading in the entertainment business and it's a bummer."
In fact, he said, "I think Sony and Universal are going to be for sale any minute, and I hope Google or Sean Parker buys them" and does something different, because "in New York, Hollywood, and London, they're still in protection mode."
In addition to subscription services, future growth sectors in music include filters like Billboard, Pitchfork and Hype Machine, and consumer tools like concert-finding app Songkick, which Geiger has invested in. With millions and millions of content makers out there, filters are going to be more important than ever, he said.
He said when he's looking to invest, he thinks, "is that something I would use as a consumer?"
Geiger also had strong feelings about digital rights management, and those who think consumers will want to own files in 10 years. He made the analogy of people surfing the web and constantly saving web pages.
"I can't listen to people that can't think past current market conditions," he said.