Tommy Boy Records' Tom Silverman on Designing $100B Music Biz: 'We're Re-Fueling the Plane in the Air'

(L-R) Director of Artist Relations at YouTube Vivien Lewit, SoundExchange President and CEO Michael Huppe, Gang Of Four bassist-turned-Artist and Music Industry Advocate for Beats Music Dave Allen, and SVP of Business Development at Warner Music Group Jonathan Dworkin.

A $100 billion dollar music industry was the topic of discussion at yesterday's packed SXSW panel led by Tommy Boy Records founder and New Music Seminar chief Tommy Silverman, with the biggest discussions revolving around streaming, subscription services and the issue of fair artist compensation. Silverman -- joined on the panel by SoundExchange President and CEO Michael Huppe, SVP of Business Development at Warner Music Group Jonathan Dworkin, Director of Artist Relations at YouTube Vivien Lewit, and Gang Of Four bassist-turned-Artist and Music Industry Advocate for Beats Music Dave Allen -- had a graphic way of describing the transitions happening within the music industry in 2014.

"This enema that we're going through is making us realize that our business is much bigger than what we thought it could be," Silverman said. "We're in the attention business now."

Attention, sure -- the music industry has always been about who could get the most attention. But in the past, that would translate easily into record sales in the millions and sold-out shows across the globe. Now, artists and their labels need to turn their attentions to ad-supported streaming models, such as YouTube -- which Lewit said pulls in 1 billion unique users a month, 80 percent of which are from outside the United States -- and subscription-based services, such as the freshly-launched Beats. The new models have acted as prototypes to the new face of the music industry, which is still in its early stages.

"It's complicated; it's not a revolution, it's an evolution," said Dworkin. "We're re-fueling the plane in the air."

For Allen, who also doubles as a professor at the University of Oregon, the analogy of the locomotive in the United States in the 1800s, which opened up the West to commerce and trade, is the most apt comparison. "The railroads created great amounts of turmoil, and you see ghost towns in the Rockies, because people left and went down to where the train could get to them," Allen said. "The Internet has affected all business." Allen looks at Beats, which he joined only a few weeks ago, as being able to provide the user experience necessary to drive users to their subscription-based model of music access. "Society has shifted; the shift to access to music at all times is undeniable and irreversible. We have to create an experience that is high value. Not free, no advertising. It's very expensive, that's why we don't see a lot of innovation -- people don't have the billions it takes to try something and fail."

The conversation then quickly changed tenor, to how the new industry will benefit artists in ways the old has not. SoundExchange collected nearly $600 million, split between labels (or whoever owns the masters) and performers, from their services that report to them, with Huppe estimating that they could reach $1 billion within the next three or four years at current estimations. Lewit pointed out that the producer behind the viral mega-hit "What Does The Fox Say," M4SONIC, was able to launch his career off the song's ubiquity, signing a production deal with Ultra Records. And Allen pushed for a restructuring of licensing contracts between artists and labels, saying that the system in place automatically leaves artists out in the cold. "Musicians need to understand that the recorded music industry was not built for them," Allen said. "It's a business. You're in a marketplace, unfortunately."

The panel agreed that the music industry was undergoing a seismic shift, but there wasn't necessarily a consensus on where that shift would take things; subscriptions, Silverman pointed out, offers the highest average revenue per user, while Huppe argued that the majority of people are using ad-supported services, paying with their time, not necessarily their money. But whatever the solution, the main goal, said the panel, is to negotiate a way to win where the new music industry distributes money more fairly than the outdated model that worked in the past. Said Silverman in closing, "This is about making a bigger pie."