I recently joined Advanced Operators; a blog carnival comprised of “super geeks” from my old stomping ground of Portland, OR, aka geektopia. The last few weeks I’ve had nothing to contribute, as I’ve not yet been elevated to “super geek” status and most of the topics go WAY over my head. This week, much to my surprise, the question at hand is regarding the future of the music industry. Finally! I think I’ve got a thing or two to say about that. But let’s follow the questions AO published as guidelines for the article to prevent too much hypothesizing and philosophizing:

1. Is the recording model still valid? If so, is it the bands that will be doing the recording and distribution?
2. If the money isn’t in a recording model, then what will the model of the future be?

I believe what they are referring to here is not the “recording” model but the “record industry” model. Recording music is still the only way to get music from artist to listener, until telepathy becomes a viable option. However, the record industry model is crumbling, as any Joe Public that has bought a track from iTunes or direct from the artist will tell you. The reason for this is not only because their commodity is loosing value in the marketplace, but because they have been slow to adapt to the changes happening in the music industry as a whole.

Record companies bring two vital services to the table, marketing and distribution. These are really the two points in question when talking about the record label business model, not recording. As for the future business model and what it will look like…that is anyone’s guess at this point. In a recent Rolling Stone article, “The Fall of the Record Business: What Next?” 5 prominent music professionals were interviewed and produced five totally different perspectives on how music will be profitable in the future. When the article was published I was in agreement with Ian Rodgers of Yahoo Music. He speculated that ad-supported music was the wave of the future. Today, after investigating many distribution options for an ebook I’m writing, I am starting to think that Nettwerk President, Terry McBride was onto something when he speculated that consumers will act as retailers. This is still a far off idea, but one that we might consider given the growing popularity of Long Tail filters like referrals and recommendations and the power of those filters in a social network community. If I like an artist I can post their music on my site for my friends to buy. I’ll make money and the artist will still make more off the sale than they would have through any other means than selling it themselves.

3. How will bands profit from the music they make?

Again, the specifics of how this will happen in the future are anyone’s guess. At the moment, artists with no record deal are making money by selling their CDs and tracks via iTunes, Snocap and other digital music stores. The beauty about cutting out the middleman is that it takes less sales to make more money for the artist. In a traditional record deal, an artist may be lucky to make 12%-20% on a record. This of course is after the advance, marketing, etc, has been recouped.

When the label and distribution company has been eliminated from the equation an artist can deliver a product from studio to consumer and retain a large portion of the profits. An artist by the name of Second Hand Serenade has become a poster child for this model. He registered his album with Tunecore, a digital distributor that charges artists a one time $30 fee per album to place on it on iTunes. Within less than a year Second Hand Serenade sold 200,000 copies of one track. After a 70/30 split with iTunes and the $30 he paid Tunecore, he made about $135,000.00 without a record label!

4. Is there a role for the Record Labels of yesteryear in the new world?

The labels will only have a place in the new world if they carve one out for themselves. By this I mean, they need to make themselves useful. Since the dawn of the record industry, they have dictated the terms and conditions of their relationship with the artist. The rules have changed and their job is now cheaply (often free) done digitally. Their new role will have to be based on a new profit center and that may be hard for them to do. For an artist at the level of Justin Timberlake, a label is a necessity. There will always be a need for a company that can negotiate corporate deals with Verizon and invest in an elaborate global tour. Most artists don’t fall under that category and may be served better managing their own career with a solid team of professionals and consultants rather than a corporate monster. Labels are taking more of an interest in touring, merchandise and publishing than that have in the past. This does not bode well for an smaller artist in the long run. They will get a nice chunk of change up front, but they are selling off more of their rights and assets than they may realize. Technology is making it possible for an artist to procure all of those services without selling their rights away, so that strategy may not be the long-term solution.

5. How do bands of the future promote themselves?

Promotion will be most effective modeled on the Long Tail theory of filters and community. Chris Andersen, author of The Long Tail, suggests that reputation is a new form of currency and this applies to musicians as well. It will take more one on one, personalized relationship building with their fans and that takes more time and energy. A band will have to WORK it harder than ever. Touring, blogging, texting, instant messaging, viral videos, and most important, being creative in how they communicate with their fans. Communication and community building are the two most crucial elements that any band must embrace to have a successful marketing and promotions plan.

6. Do you want to or think its “right” to pay for music?

I believe that artists should be compensated for their work. I also believe that HOW they are compensated is part of the new paradigm. Gerd Leonhard, a media futurist, illustrates this point in a video presentation on the future of the music industry. He claims that it is no longer a “pay first paradigm.” The recorded music is becoming a free promotional tool used to build a fan base, something that many bloggers may relate to. We give our most valuable commodity, our knowledge, away for free in hopes of building a reputation that will bring us the work we desire. A good song may bring another fan to a show, sell a t-shirt, get licensed in a movie, etc. The profit is coming at the end of the cycle, once a fan has been won and a relationship with them has been developed, not at the beginning or discovery phase. Consumers are now dictating what is popular, not the record labels. Our choices are no longer being shoved at us from the top down, we are pushing our choices upward.

Piracy is a serious issue of copyright violation. The defenders of copyrighted material are vehement in their crusade, but have done little to prevent rampant file sharing from Wisconsin to Beijing. The RIAA has done a pathetic job of convincing us that we are stealing if we don’t pay for music. Maybe because, for all their lawsuits and rabbel rousing, they have made us realize that corporations are greedy and that their least concern is the artists they claim to be protecting. What if, since the beginning of the record industry, records were free promotional tools that labels used to get people to a show? Would we consider it stealing if that had been the model all along? And remember, we are talking about the record industry, not the music industry as a whole. Music is thriving, despite the fact that the labels aren’t. Artists are still making money, just not from selling records. A recent documentary from our neighbors to the north is a very illuminating look at the subject of piracy in the music industry.

7. How important is rights management to the future of music?

I think the answer to this question is obvious…of course rights management is crucial, always has been and always will be. Whoever controls the master and the publishing is the one making the money.

The future of music is undeniably tied to technology, but which technology will produce the strongest business model is still up in the air. Perhaps it will consist of several models, depending on which direction the artist wants to take their career. And maybe it will be one that has not yet been conceived. Either way, it is apparent that it will unfold online and be community-based. I am very excited about the future of the music industry. But I see one great challenge ahead, the chasm that exists between technology (web developers, futurists, programmers, etc.) and the artist. I’ve sat in on many meetings with technology companies that have a great idea to capitalize on the music industry with no concept of how the artist thinks or works. In meetings with artists I find they are often clueless as to what the hell to do next. They are overwhelmed with options and can find no one to educate them. A bridge needs to be built between the artist and technology. Technology should reach out to better understand the genuine needs of an artist and how to facilitate them. Artists need to better understand what technology has to offer and how to utilize their services. Harmony between the two will bring about greater innovation and choice as well as a greater financial return for them both.

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Hello guys and gals. I’ve been on hiatus from my blog in August, feverishly working on my new book about blogs and blogging. Once it’s ready I’ll give you more details.

In the meantime…here is a video presentation of Gerd Leonhard on the Future of Music. Gerd is the head of Sonific, a streaming music application. He calls himself a Music Futurist and has written several books on the subject. Rick Rubin recently quoted some of his ideas on subscriptions services in an article for the New York Times. I have not read any of his books but based on this informational video, he knows his stuff.

Pay close attention to his new paradigm of purchasing. “It is no longer a pay first paradigm.” How true.