Silverman, CEO of Tommy Boy and executive director of the New Music Seminar, shared one possible scenario for the music industry to achieve its full revenue potential. "If we could just get $1 a month paid by mobile music providers from even half the mobile phones out there now, we could generate another $36 billion a year — taking the total to $60 billion in music revenues," he said. "The telcos are repositioning themselves as connectors now… What does it cost mobile service providers to acquire new customers? What’s our pitch to the tech industry? What’s the cost of revision versus retention?"
Samsung is one such mobile provider, representing a huge chunk of music listening activity and even further revenue potential, with sales of 56 million smartphones in the third-quarter of 2012 alone (almost double its closest competitor) and additional sales of 106 million music-capable non-smartphones. What’s delayed some of that revenue conversion is publishing. "Around the world on the label side, there’s so many different companies you have to work with when you look at the scope of these revenues," says Daren Tsui, CEO of Mspot, Samsung’s music hub. "The other thing is just looking at the other types of models out there."
Building the $100 Billion Music Business: Guest Post by Tom Silverman
Spotify is another company that’s rapidly creating new sources of revenue for the music industry, with 5 million paid subscribers worldwide as of fall 2012 — a surprising amount of which are 18-to-24-year-olds, the most elusive demographic within that non-music purchasing 97%. "We’ve actually learned from pessimism, [of people saying] ‘You will never get people 18 years old to start paying for music,’ by showing it’s absolutely possible with the right kind of experience – 30% of the people who pay come from the demographic 18 to 24," said Ken Parks, chief content officer and managing director of Spotify.
YouTube is also at the top of many artists’ lists as a significant source of revenue, from music-video service Vevo to the royalties YouTube pays to artists for views of its own videos, as well as covers and parodies. Video virality is only spreading faster, too — Patrick Walker, YouTube’s senior director of music content partnerships for Europe Middle East & Africa, noted how Psy’s "Gangnam Style" was able to rack up 1 billion views in just over three months, while Justin Bieber’s "Baby" from 2010 took nearly two years to achieve the same milestone. Daily activity on YouTube has also only barely begun to reach its full potential.
"When I started at YouTube at the time of acquisition [in October 2006] it was getting 100 million views per day," Walker said. "Now it’s over 4 billion per day. That’s up 30% over last year. New countries are coming online, new devices are making it easier. Even when we broke records for simultaneous streams with Felix Baumgartner with 8 million views of the Red Bull Stratos jump [last October], that’s amazing but it’s still less than the U.S. prime-time viewership for ‘X Factor.’ What’s big for the internet is still small compared to the potential of the next biggest event. We’re only scratching the surface. Numbers that look big today are gonna look even smaller next year."
And for the record labels themselves, becoming more involved in the creation of music-playing and music-connected device like TVs, speakers and even refrigerators (both Sprint and Samsung are creating connected fridges) could also bring new areas of revenue. "The living room is a place where people love to consume their music," said Mark Piibe, Sony Music’s exec VP of global business development and digital strategy. "If we as content owners can enable product design solutions which are gonna excite people and reach a mass-market level, that will greatly expand the digital music market."