The traditional music biz is over as CD sales dropped about 20 percent from 2006 and 2007. And revenues from that physical music business are likely to comprise just 20 percent of an up and coming band's revenue stream. There's the big business of concert tours, which continues to be strong.
But the new boost for young bands comes from other forms of entertainment. Licensing songs to TV shows, movies, and video games is a bigger business than ever.
Remember that song from the end of box office hit "Juno"? The singer, Kimya Dawson's career took off after such key placement. And movie soundtracks have long been a way to sell music -- either reviving old songs--like in the "Almost Famous" soundtrack, or introducing new artists like in the soundtrack for "Garden State," which was lushly illustrated by its indie sounds.
Now young bands are playing a larger role in TV shows. TV networks spend between $1,500, plus residuals, for a song from an unknown band, to up to $50,000 or even (gasp) $100,000 for a hit song from a famous band. ABC's "Grey's Anatomy" has been a leader in putting unknown bands in the spotlight in key scenes.
Newcomer, NBC's "Lipstick Jungle," gave a big break to the Canadian band Bella. I spoke to the band members who said that if they want to be profitable, licensing music is the way to go--you get paid upfront, unlike with album sales.
I also spoke to the VP of NBC Universal's music division, Alicen Schneider who oversees music selection for a number of NBC shows. She says that the music is key to set a mood for big moments, and that the shows want to be known as a source of fresh bands. And from a financial perspective, they'd rather find a new, inexpensive band, rather than have to go with a more familiar (and expensive) one.
Video game makers are also in on the music scene: spending about one percent of a video game's budget or between $100,000 and $150,000 on music. Electronic Arts actually has its own music label so when it finds young bands to place in games, the company can get a piece of the success the game's exposure brings. If the head of the music division, Steve Schnur, thinks that a new band could become huge, placing its songs in a video game yields returns all-around.
It helps that the same male demographic that plays video games also are huge consumers of music. Then the question becomes getting them to pay for music, rather than download or file share illegally. But that's another story entirely.
Questions? Comments? MediaMoney@cnbc.com