In this guest post, New Music Seminar/Tommy Boy Entertainment founder Tom Silverman describes how we can grow the music business into one that reaches $100 billion in annual retail revenue in the next decade.

Going through last year's U.S. sales numbers, a startling fact jumped out at me. So when the MIDEM director, Bruno Crolot, invited the New Music Seminar to present a panel at MIDEM this year, I knew it was the perfect place to discuss how to grow the music business and set a real goal of $100 billion in annual retail revenue that we can achieve in the next decade.

The 12th year of flat or declining sales and revenues has directly resulted in a reduction of artist rosters, signings and investment of roughly 50% and music job losses in the realm of 60% since 2000, based on my conversations with business affairs people relevant companies. The music industry has never been more risk-averse than it is today.

The only way to get more investment into more artists and create more music jobs is to increase the revenues of the music business.  We used to think the only way to do that was to sell more albums and sell them at a higher price. The trend analysis below explains why that is no longer a possibility. The music industry must focus its efforts on developing a new paradigm for music revenue creation.

The current U.S. retail value of the business is around $7 billion and the world is around $23 billion, according to the RIAA and IFPI. Looking at U.S. album sales and single sales since 1995 and projecting sales out to 2020, one thing becomes clear; music sales revenues will be down or flat for the foreseeable future. Physical CDs will continue double-digit declines in units and even greater declines in value. Digital albums will continue to grow and will pass physical CDs in 2015 in unit sales, but gains in digital sales will continue to be erased by declines in physical sales causing a ceiling on overall U.S. album sales of around 300 million per year, according to projected current trends. Digital single sales growth is slowing: we almost reached 1.4 billion in 2012 but it is unlikely that they will reach 1.5 billion in 2016 before they begin to decline. When you consider inflation at around 2% a year, you see that sales revenue cannot support a sustainable music business.

 
A conservative projection of future of music sales in America (it could be worse)

The good news is that non-sales music revenue is approaching 25% of all music revenue and is the only kind of revenue that can support a vibrant sustainable music business over the long term.

  • Music synchronization license revenue continues to rise.
  • Advertising-revenue sharing is in the top 10 earners with YouTube, Vevo generating substantial and rapidly growing revenue with others joining the party.
  • Music cloud lockers like iTunes Match, Amazon Cloud Drive, Google Music, Xbox Music and Samsung Music Hub are yet another new revenue center for the music business.
  • Music performance revenue nearly hit half a billion dollars in 2012 at SoundExchange with projections of a billion dollars of revenue in four years.
  • Subscription revenues are the biggest growth area.  Spotify recently announced US paid subscription over 1 million. Cricket/Muve announced over 1.1 million subscribers. Rhapsody with PCS/Metro has well over a million subscribers and Xbox music is also in that ballpark.  Rdio, Samsung Music Hub, Slacker, and Beats Electronics' Project Daisy launching now will also garner millions of subscribers.

Don't forget, one company has already achieved 23 million paid music subscribers in North America at a higher subscription price than any of these music services that pay SoundExchange statutory rates: Sirius/XM. And they did it without on-demand, cloud locker, social or even interactive functionality. Although combined music-streaming services may only have 4 million US music subscribers today, 50 to 100 million are clearly possible. At 50 million subscribers at $10/month, the industry nearly doubles with an additional $6 billion in gross revenues.

There are only an estimated 300 million music buyers in a world of 7 billion people. There are 6 billion active cell phones and 1.2 billion smartphones. 50 million new cars hit the roads every year. The Consumer Electronics Show was a tribute to these and other connected devices. How can music subscriptions be bundled into as many of these subscriptions as possible? Just an average monthly subscription of only $2 bundled into 3 billion devices would take revenues to more than $90 billion from our current $23 billion.

In anticipation of the New Music Seminar, this June 9-11 in New York, we are heating up the conversation at other conferences. The first NMS road show will be at MIDEM on Saturday, (January 26), where we will convene many of the companies leading the charge toward the $100 billion music business. Speaking will be Xbox Music's Jerry Johnson, YouTube's Chris Maxcy, Spotify's Ken Parks, Sony Music's Mark Piibe and Samsung Mspot's Daren Tsui.

Yes, I believe that there is plenty of life left in music sales but I also believe that we must embrace non-sales revenue opportunities if we are to achieve the $100 billion music business. It will take an organized effort by the music industry and our technology, device and mobile service providers to make this dream a reality, but we made just such an effort in the early '80s when we launched the CD. IFPI, RIAA and all of the music stakeholders from musicians and songwriters to labels and publishers must organize now to build the business we all want.

Questions? Comments? Let us know: @billboardbiz

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