Speculating about the future can be overwhelming, but we also feel it should not be abandoned. Last year the talk was about how streaming needed to scale. This year it has been mostly about data. Though we will save the data for another post, the data gold mine needs two parts to be successful: It requires a partnership between those who know how to use the mining tools, and those who know what gold looks like.Without domain experience the data will find spurious relationships, taking much longer to analyze. Similar to what streaming shows us, (who is listening to what song, when and where) our business is built on contextual listening experiences. The difference between us and data-journalists, however, is a 15 year head-start interacting with artists and observing the audience in the real transaction. Our research does not discredit other areas of the music industry, but rather hones our attention on those positioned to lead the new music business. This post will pick up where Live Nation Labs left off and look at two areas poised to lead the future of the music business. (caveat: Tidal may be the first to crack a new business model)
Time after time we have seen first movers get pushed out of the space by a competitor’s impeccable design, simple interface, or better user experience, and we see this happening again in music streaming. After thinking about the new music space for four years, our feeling is that next year’s two topics of discussion will revolve around the largest music streaming player & the city at the center of the music business. The way it looks, Apple will be the influence to grow streaming. Not because they have vast amounts of credit cards, but because they enter late, capture the audience’s attention, and deliver a quality experience. What makes Apple “Apple” is its focus on quality, and the same can be said for Music City. On the non-digital (physical) side of the music industry we see Nashville, TN as a birthing ground for new musical talent. Barry Gibb calls Nashville “the center of the music industry” and Richard Florida calls it the Nashville Effect, stating “It’s turned into the Silicon Valley of the music business, combining the best institutions, the best infrastructure, and the best talent. And…for multiple musical genres.” (note: if you would like to replace the words “nashville” “music city” or “music row” with “silicon valley”, please feel free to do so)
For decades Nashville has been recognized as the Country Music Capital, but its role to the rest of the world is “Music City”, and the numbers suggest over 10,000 new residents are moving there each year. This historic growth puts Nashville in the top 10 cities for growth, but this spike in population has also put Music City in an awkward place. Music Row and Apple are both confronting the Innovator’s Dilemma, but for Music Row this time is a bit more serious. The growth comes at a time when Country music sits at the top of the charts but the music industry remains in decline. Due to the technological shift in the recording process and people’s listening habits, Music Row’s real estate on 16th and 17th avenues are worth more today as use for condominiums. The property on these streets have even gained attention from the National Trust of Historic Preservation, and are now deemed a National Treasure. The awkwardness of this is that areas that usually receive this support, do so in an economic downturn. Though the music industry is in a downturn, the city of Nashville is flourishing. Only a few days ago we counted eleven construction cranes in the downtown area, and this summer the new Ascend Amphitheater will begin hosting concerts in a 6800 capacity riverfront venue paid for by the city.
Apples on trees grow from the inside —> out & true growth comes from the center.
Apple’s investment in Beats can be chocked up as the cost of doing business in music, but with this purchase they not only secured a streaming service and headphone brand, but a hip-hop artist/producer, a hard rock pioneer, and a former record label executive, who also sits on the board of Live Nation. Their latest music based acquisitions include a popular BBC disk jockey, BBC producers, as well as a request for music journalists. Apple, a music/tech company, also manufactures the playback device, capable of offering a download store, a radio service, and an interactive streaming service. While other streaming services continue to invest in engineers, Apple is busy building a full music ecosystem. These approaches signal that some services are concerned overall with technology and others with music. In the history of time music has always outlasted technology.
Though disruption is a hot topic in the music industry we do not feel Music Row will be fully upended. Let’s revisit what Barry Gibb said about Nashville being the center of the music business. Nashville is the center of the concert and touring industry. Only the best players tour, and the majority are based near Nashville . The decision to be near other quality musicians puts the pressure on to become better, and during the turn of the millennium Nashville boasted the largest concentration of musicians.
Four out of five of the most followed people on Twitter are musicians, Twitter is likened to a town hall or forum, and Nashville is known as the Athens of the South. For over sixty years Music Row has been a major reason some of the best musicians flock to Nashville. Businesses compete for top talent, and the top talent are based near Nashville. To Nashville’s benefit, and due to the “seismic shift in the economics” an artist’s profit comes from the live show. Over 50% of the total music industry spend is in the live realm and 64% of all nightlife tickets are spent on live music. Sony NY recognizes the need to build out the 360 model to focus on this revenue stream. and Nashville’s central location means it also has a very close relationship to the bus leasing business.
figure eight tour routing
Though there is large demand to be near the best music America has to offer, quality musical talent is not the only piece of this puzzle. “People also seem to like music that is relevant to the times that they live in.” Jim Davies ~ The cost of living in California or New York is not feasible for artistic types like it was back in the sixties. New York City hovers around 33% above average, and has even started a campaign to advise the hipster, folk, indie movement to consider moving to Detroit. Another sign that New York can not support artists is the 35% tax credit for music production. This is needed to balance the high cost of living which still does not suffice. Artists need space to create and space is hard to come by in NYC. Near 6.6% below the average cost of living, and with a lot more space, it’s obvious that Nashville is a good buy for millennials, Even the music properties in CA and NY are having to scale back to operate effectively. For some of us moving to Nashville is probably a cheaper option than visiting. In 2014 the average price of a hotel room increased by fifteen percent. The largest surge for any U.S. city. Following Nashville the two cities with the fastest-growing average daily rates in 2014 were San Francisco and Denver.
Considering a company’s capacity for growth at the macro-level, most will come face-to-face with the Innovator’s Dilemma. Apple has confronted this many times and Music Row is looking dead-on at this decision today. Either grow something new from the inside out or get disrupted by a competitor. America can not continue to copy or derive works from others. Nashville has always been about talent, the players, the performers, the singers, the pickers-and-a-grinners. Apple and Nashville bring together what people really want, quality experiences. People know the difference between good and bad performances. We’ll pay to see the good ones and watch the bad ones for free.
The leader of American music today is Country music, and leadership in America has everything to do with creating something new. Some might say Country went Pop, we see the growth as Pop going Country. The goal for America is to do new things. It’s not about exceptionalism. It’s about leadership and leaders convince us to try new things. Sony/ATV also sees this shift and recently sent a New York A&R rep to Nashville to form a Pop division (non-country). Though some Music Row executives do not want this party to end, this is exactly what has to happen for true change to occur. The changes in music do not wait for anyone, and to not be on board with change can be costly.
For Nashville to be the Silicon Valley of the music business, Music Row has to disrupt itself, and focus on what makes it Music City. Music City must take further steps to innovate. It must begin to try new things, learn to fail fast, iterate the finished product, and make great music for the audience that demands great experiences.In such a flooded global market for live music, people still want to experience the best there is to offer. What makes Nashville “Music City” is its caliber of musical talent. Today’s job for A&R and Producers is to focus solely on the best talent. From songwriting to performance, or premise to conclusion, the idea is to maximize talent the same effective way as Silicon Valley.
Like RocknRoll and the shift to FM, our country needs a new sound to lead the growth in digital streaming. The question to be asked is “What will it take to bolster this rapid growth and convert the listening audience to streaming?” The answer is a focus on infrastructure and a new supply of quality music. A new sound that motivates and generates new value. The only way to bolster this growth is with new timeless hits. The next generation of Nashville’s music industry leaders are not afraid to get their hands dirty, and John Sebastian agrees, it’s those Nashville Cats that motivate us to be better.
Songwriting is rarely top-down but as of late there has been a diminishing number of writers in Nashville. It has all been led by a few “experts” tied in with the labels. For those who understand Nashville politics it seems to fail if it goes the way of ATL/CNN and Austin/SXSW and will win if it sticks to what it’s best at, attracting talent of the highest caliber and with the utmost of principles. The party can’t last forever.