With Live Music On Hold, The Industry Needs A New Video-Based Model To Stay Afloat
Taylor Swift is undoubtedly one of the biggest names in music. Her most recent album, “Folklore,” debuted at no. 1 on the Billboard 200 chart despite minimal advanced buildup. Her previous six albums also reached the top spot, making her the only female to have seven consecutive no. 1 albums to open a career.
Meanwhile, Swift’s last tour, which wrapped up in late 2018, grossed over $345 million and enjoyed the highest average attendance per show since U2’s 360° Tour. Her spat a couple of years ago with Spotify and her record label was well-publicized, ending with the streaming giant agreeing to give artists more money.
She’s a powerful star, and while not everyone has to enjoy her music, it would be foolish to deny her ability. She’s a unique talent.
Despite all this, she serves to highlight everything that ails the music industry. For that matter, so do the likes of Elton John, Beyoncé, Bruce Springsteen or anyone else who makes up the industry’s upper echelon.
All these folks can sell out stadiums in minutes and leverage their clout to wring millions out of streaming services. And because of it, many of them are as successful as ever, which is not a problem by itself.
THE HAVES AND THE HAVE NOTS
The issue is the music business, much like society, has become stratified, with a few haves on one end of the spectrum and a whole lot of have nots on the other. The result is that thousands of hugely creative and gifted musicians from coast to coast are struggling to scrape by.
It wasn’t always this way. For decades, musicians followed a tried and true approach to support themselves: put in the work to release an album, sell thousands of copies and then go on tour to promote it.
This business model didn’t make a superstar out of everyone, but it generated enough revenue that allowed a much broader universe of musicians beyond just the industry’s biggest names to at least make a living creating music. Beyond that, it also established an ecosystem that nurtured the next generation of talent. Today, that entire dynamic is gone.
THE NAPSTER EFFECT
What changed all this was Napster, which conditioned an entire generation of consumers that they shouldn’t have to spend money on recorded music. That mentality destroyed the concept of the album, leading iTunes to sell individual songs instead and, eventually, companies to launch ad-supported streaming models.
Consequently, music has become commoditized, with the likes of iTunes and Spotify only able to charge about $10 per month for access to tens of millions of songs, which leaves next to nothing for most artists. The outcome is that it’s difficult to think of a more significant disconnect between how much people enjoy something and their willingness to pay for it.
The COVID-19 pandemic has only exacerbated matters. Before the outbreak, touring and festivals provided mid-tier and small acts the opportunity to build an audience and make a living. Now those two avenues are gone. Popular festivals like Coachella, Bonnaroo and Austin City Limits have been canceled, while promotion companies AEG and Live Nation have seen their businesses get decimated.
THE FUTURE IS VIDEO
In many ways, music faces the same problem as print media. For years, reading newspapers online was completely free, whether it was the Washington Post or a small local daily. Slowly, it became clear that this model was unsustainable.
And though the business of journalism remains fraught with challenges, many outlets have managed to convince the public to pay for content in recent years. The New York Times NYT continues to add digital customers at an impressive clip, while the ad-free, sports-focused startup The Athletic recently announced that it hit one million paid subscribers.
Music has the same task: Persuade people to pony up for premium content. In the wake of the pandemic, when nearly everyone has increased their internet consumption, the key is leveraging the power of video.
Because consumer behaviors have shifted so dramatically in recent months, the appetite exists for someone to build a video service that goes all-in on musical acts, both large and small. YouTube, Facebook, Amazon AMZN (via Twitch) and Spotify all have both the means and, presumably, the motivation to put together a subscription service or an ala carte-based model that allows consumers to watch bands play from anywhere.
The biggest names can probably get away with charging $15 -$40 or more for a show. More obscure acts will garner far less, but the tradeoff is the ability to reach new markets, to team with sponsors and to sell merchandise — all of which is easier to do using a live digital format.
Indeed, what’s better: Touring the country in a beat-up van and hoping 150 people come to your show (which isn’t happening in today’s world anyway)? Or playing in a made-for-video venue and selling your music on a platform that could reach millions of people worldwide?
It’s always been tough to make a living playing music, but now it’s virtually impossible. Given how quickly the service economy has evolved in recent years, it’s incredible how few platforms exist that allow artists to connect with fans, to build their brands and to more directly sell their art for fair value.
If more don’t materialize soon, the wounds the music industry have suffered in recent years may never heal.
Ross Gerber is CEO and President of Santa Monica, Calif-based Gerber Kawasaki Inc., an SEC-registered investment advisor with approximately $1.4 billion in assets under management as of 10/15/2020. Gerber Kawasaki clients, firm and employees own positions in Google, Amazon, Apple and Spotify. Please seek guidance from an investment advisor before making any investment. All investments involve risk and may not be suitable for your situation. Follow Twitter: @gerberkawasaki.