The Major Labels Are Not Reestablishing Their Dominance

The Misleading Statement

A couple weeks ago, Forbes ran an article detailing how the major record labels were taking their “revenge” on the current landscape by making “strategic partnerships” with music services to reestablish their dominance. This was a very bold statement. Here’s why it’s misleading, and essentially false.

The major record labels (the Big Three, Warner Music Group, Universal Music Group, and Sony) are indeed striking deals with music services like Spotify, Rdio, and SoundCloud, but these deals don’t signal what the article asserts that they do. The reality is that the majority of the label-service partnerships revolve around licensing rights and royalty payments, an already broken system that will continue to feel squeezing pressure as we move further into the digital age.

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What the major label industry really looks like; The Big Three

What the major label industry really looks like; The Big Three

The article focused on the labels’ calculated move to reassert their control as gatekeepers by using their access to artist content as a leveraging technique. This is true, and is completely expected; the labels are doing what they can to hold onto what power they have left. But the reality of the situation is that this isn’t a new move; it’s a rehashing of the same dynamics that the labels have relied on for years. This is exactly why they’re not “taking revenge” on anything or anyone.

The Ironic Voodoo of Ignoring the Middle

As much as they would like to believe they still hold the power they once did, the major labels need to acknowledge that their ability to deem music as “good” or “sellable” is essentially irrelevant in the grand scheme now. It’s lost a certain sheen of relevance because they’re no longer the only deciding force out there to dictate the music the gets made or played. Now, the power of choice and reach comes to and from anyone with an internet hookup and a laptop. Ergo, though they may try to deny it, the major labels are gatekeepers no more.

So here’s where the ironic voodoo comes in: major music streaming services like Spotify and Rdio sign licensing deals with the major labels because they think that’s the only way to survive in the music landscape, and the major labels license their music because they essentially see no alternatives at the moment. Simultaneously though, both sides ignore those artists who fall in the middle: the independents (who, by the way, make up a massively growing market). Thus they are dismissing today’s independent artists who might be major underground sensations tomorrow. SoundCloud used to be a happy place for the independents. Then even that changed when they signed a deal with Warner and began seeking out deals with the other major labels.

The Punch: The Percentage Dynamics People Ignore

I wrote here why independent artists will eventually begin to move away from SoundCloud. What I didn’t focus on at the time, and precisely what the Forbes article glazed over, are the percentages of these streaming companies that are owned by the major labels. Beyond my argument regarding SC and Warner, the Forbes article noted that Warner owns 5% of SoundCloud, which it acquired in the streaming service’s latest funding round (and also which it acquired at about a 50% discount from what other investors paid).

That’s not all though; all of the Big Three collectively own about 10-20% of other streaming services, such as Spotify and Rdio, as well, and Universal jumped on a 13% stake in Beats before Apple snapped them up. (And this doesn’t take into account all the “360 deals” that are taking place).

Thus, we have the major labels, who control the licensing that these streaming services depend on, owning parts of the streaming services themselves. Essentially they can bully the services into driving towards what’s best for their artists with the power to pull their licensing from said services if they don’t comply, thereby draining them of their lifeblood. Doesn’t sound like a pyramid scheme to me at all… Oh wait, yes it does.

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Major Label Percentage Ownerships of (some) Streaming Services

Major Label Percentage Ownerships of (some) Streaming Services

Here’s what it means in the bigger picture: the major labels are gobbling up these stakes to preserve their roles as the gatekeepers of the musical landscape, and to possibly make a grab at the distribution arm for their music. Despite the fact that this is working for them for the moment, it most certainly does not mean that they’re reestablishing their dominance over the music landscape. This matters for two main reasons:

  1. It underscores the reality that the labels aren’t really coming up with any new tricks; they’re just rehashing the same ones again.
  2. It proves that assertions of “equal opportunity” for independent artists on streaming services like Spotify and SoundCloud are basically false.

Why Warner Now Holds Leverage Over SoundCloud

With its 5% stake in SoundCloud, Warner will clearly attempt to steer the service’s vision and attention towards the the artists it represents, and whose interests it has at heart. Why would it not? That’s exactly what I would do. It’s not personal for Warner, it’s just business. But what it means for independent artists on SC is something much bigger: that they will no longer be the focus of the service, and again will need to contend themselves with scraps of attention after the major label(s) is (are) done feeding.

Look at it from the point of view of Warner: why would they contribute to SoundCloud’s latest round, snapping up 5% (even at a 50% discount) if they weren’t going to leverage that to their advantage? The point is they wouldn’t because they’re going to do exactly that.


SoundCloud logo

Now that Warner has control (to some extent) over the new distribution channel, SoundCloud, as well as the music that SC wants to license (i.e. the lifeblood of any music service), it holds all the leverage in the relationship. Essentially if SC doesn’t steer its model towards what would benefit Warner’s artists, Warner can decide not to renew its licensing agreement with the service, thereby cutting out SoundCloud’s feet from under it. And the same is true with the other labels and streaming services. The labels are worming their way into controlling not only of the material for distribution (the music), but the distribution channels as well. As a result, we end up with the same concentrated power dynamics and gatekeeper power-plays as we had before.

Squeezing Models of the Past

Yet, easy though it may be for the major labels to dig into their deep pockets and purchase stakes in these streaming services hoping to once again gatekeep the music landscape, it is nonetheless not the same game they are used to playing. It’s now much easier for any music startup to get into the streaming or downloading service—and thus become a new source of distribution for artists. This means that the probability for the major labels to bottleneck and control the distribution channels is actually much smaller, particularly when it comes to artists and services that don’t focus on major label content, but rather independent dynamics.

For all their “strategic partnerships” and licensing/royalty practices, the major labels are not taking revenge or “reestablishing their dominance” over anyone. They’re still playing catch-up, and will continue to do so as long as their business model revolves around the obsolete (and completely unfair) royalty paradigm. Realistically speaking, the majors are playing a losing game: they’re no longer essential for artists to find fanbases or have exposure—the internet’s taken care of that. Independents can now crowdfund themselves, as well as make their own way in the live arena sans any “360 deals” with labels.

Perhaps the most telling part of the Forbes article came in the last sentence. One phrase pretty much summed it all up: “By looking forward, while squeezing the models of the past…” The rest is irrelevant. Even Forbes knows that the major labels’ models are outdated and like squeezing water from a stone. That begs the question: if they know, and we know, why don’t the major labels seem to get it?

Blogging: One Month In—A Retrospective

Today marks one month since I started blogging every day, and man has it been a long month. Though long doesn’t necessarily mean bad, and in the last few weeks I’ve found myself able to talk about a number of topics that might not have occurred to me otherwise. True, a lot of my posts have been on topics like music and tech that I continually follow, but the desire to write every day has enabled me to streamline my thoughts into a more digestible format.

In the last month, I’ve discussed numerous things in the music and tech space, including:

Yet I’ve found myself able to write about things that otherwise would seem unimportant, had I not had a goal to write every day. I’m not sure writing posts on writer’s block, on singing, art, and on concepts of passion would ever have occurred to me without the goal to produce new material:

Perhaps the most intriguing thing that’s happened though is how my desire to write has only become more engrained in me. I’ve always been a writer—essays, journalism, poetry, and research papers always came fairly easily to me, and even provided a sense of enjoyment most times. But now my writing has taken on a whole new dynamic in my life.

In fact, it mirrors what artists tell me when I ask why they choose the tough path of day jobs and long nights on the road: “I do it because just like I wake up every morning and need to breathe, I need to play music.” And that’s how writing is to me now. I wake up ever morning and need to breathe, and then I need to write.

The Typhoon Keeps Coming for Tidal

It’s not been an easy couple of weeks for new music service Tidal. A slew of bad press and criticism during and immediately after the service’s launch is continuing to be a thorn in the side of the company’s leadership. So much so that a major restructuring was just announced; things aren’t about to get easier any time soon.

I was first a little skeptical of Tidal during its much-hyped launch, then again when it enjoyed a spate of criticism from mainstream band Mumford & Sons, and most recently when producer Steve Albini piled on to the already bruised service. Things have just been really bad for Tidal since it emerged in the last few weeks. Now it seems that the service itself is intent on rubbing salt in its own wounds.

Business Insider broke the news today (as did other sources like Digital Music News) that Tidal was being strongly shaken up; 25+ people on the Tidal team were being fired to make room for a new direction. Of these, the name that surely drew the most attention was And Chen, the now-former CEO of the service. Maybe it’s just me, but firing your CEO just a couple weeks after your very public launch seems to say a lot about a company’s fortunes, at least in the short-term.

Former Tidal CEO, Andy Chen

Former Tidal CEO, Andy Chen

Chen’s removal will make room for Tidal’s former CEO Peter Tonstad (who was the former CEO of Tidal’s parent company Aspiro Group). In an statement to BI, Tidal commented on the impending change:

TIDAL’s new interim [sic] CEO is Peter Tonstad—a former CEO of parent company Aspiro Group. He has a better understanding of the industry and a clear vision for how the company is looking to change the status quo.

Correct me if I’m wrong, but did Tidal just admit that their now-former CEO—Chen—was basically unqualified for the job? Because that’s essentially what I heard. After all the fanfare that Tidal inundated the press with around its launch, I thought for sure that they at least had a concrete plan to try and accomplish their goals. As critical as I was at the time, I at last figured that their leadership had sufficient experience and vision to make the Tidal brand somewhat competitive for a little while. Clearly that’s not the case.

I was critical of Tidal before because I thought (still think) that they’re attempting to sell a product (service) that essentially is very expensive and not wanted by enough people to offset the expenses to provide it. I was critical because the artists who I saw standing up on stage during the launch don’t need any more money in their pockets, and it came across to me as greed.

Now I’m critical of them because changing your CEO and firing 25+ employees ~20 days after your very public launch is not a good way to start the spring. It shows both a lack of preparation for your business market, and frankly a lack of appreciation for your prospective audience and their thoughts. Actually, you come off as socially tone-deaf.

We’ll see how this progresses, but I must say, I am really not impressed with Tidal’s handling of this entire situation. This is not the way to build trust in an industry that is basically overrun with distrust, and filled with people who are used to getting taken advantage of. This is not a good start; not a good start at all.

Tidal’s Choppy Waves Keep Rolling

The choppy waves keep on coming for Jay Z’s streaming service Tidal, as today it was hit again with another round of criticism. I myself outlined my thoughts on the Tidal service first in a post when it launched, and then again in a questioning follow-up post earlier this week. This time, though, the critique comes not from disgruntled music streaming fans or competitive services, but from Steve Albini.

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Tidal logo

Tidal logo

For those unfamiliar with Albini, he cut his teeth in the mainstream spotlight producing albums for artists like Pixies and Nirvana, and has become an outspoken critic of many of the streaming services in the last decade. A criticism from Albini can’t be as easily dismissed as it might otherwise be particularly because he has both the industry experience and insider knowledge to call those in the industry on their bullshit.

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Steve Albini; Photo courtesy: Jordi Vidal, 2014

Steve Albini; Photo courtesy: Jordi Vidal, 2014

Albini has been critical of the mainstream music machine even before Kurt Cobain’s death, jumping into the mainstream music business debate in 1993 with his piece entitled The Problem With Music. He’s done the math and lived out many of the results, and so when Albini takes aim at your service, you better realize that other people in the music community will take notice (even if the mainstream isn’t).

In an interview with, Albini used phrases like “little streaming fiefdoms” and the “budget version of Pono” when referring to Tidal. While the latter comment is a critique on the mainstream listener’s ability (or even care) to distinguish between lossless quality and normal mp3 audio quality, the former is almost a little more telling. “Little streaming fiefdoms” is pretty telling in and of itself; it’s dismissive of what Jay Z and company say Tidal is (and purportedly will be), instead asserting that the service is yet another little city-state vying for validation in the greater streaming landscape.

Perhaps the most intriguing thing about this particular thought process is what it means for the dynamic of the current landscape; as Albini (and others) become increasingly critical of services that act like little principalities, the traditional walled-garden approach to music seems to be under siege. And there are those of us who rejoice in that. The walled-garden concept works well in numerous areas of tech and business—it’s great for security, healthcare, and finance. But it is not good for media, and music specifically.

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Criticisms of Tidal on Buzzfeed the day after its launch

Criticisms of Tidal on Buzzfeed the day after its launch

Music is freedom, and needs to be treated as such. To constrain music to the dynamics of a walled-garden system is to take away so much of the actual discovery and freedom that is associated with it in its purest form (though many would argue that there’s still plenty of “discovery” to be had). Regardless of this fact though, it remains an important fact to note that people of Albini’s caliber are taking aim at people like Jay Z and services like Tidal.

One might even argue that they—whether they intend to or not—are clearing the path for new music services yet to be launched. Only time will tell in that regard. For me though, this does not go unnoticed. Anyone interested in the future of the music industry would do well to keep these criticisms catalogued and fresh in mind. It’s precisely by graphing these grievances that we will begin to see how the future of the music industry will unfold.

What Does It Say When Mainstream Artists Start Criticizing Tidal?

I’m not much of a Mumford & Sons fan. I have nothing against them as musicians; I just find that my taste in music to be a little different. But I respect the hell out of them for the statement they put out today.

Pulled by Digital Music News from other sources this morning, M&S were reported as disliking Jay Z’s new service Tidal. They’re not alone; other mainstream artists like Lilly Allen and Mariana and the Diamonds have voiced distaste for the service. And that’s not even taking into account the near biblical response from music fans over the service, all of which I spoke about in my coverage of Tidal’s relaunch a couple weeks ago.

But what makes M&S’s statement so stark is the candor with which frontman Marcus Mumford explained the band’s view of the service:

We wouldn’t have joined it anyway, even if they had asked. We don’t want to be tribal. I think smaller bands should get paid more for it, too. Bigger bands have other ways of making money, so I don’t think you can complain. A band of our size shouldn’t be complaining. And when they say it’s artist-owned it’s owned by those rich, wealthy artists.

Wow, some pretty powerful words from the neo-folk rock frontman. I rest my case. I may not be a major fan of M&S’s music, but I for damn sure am a fan of how they see themselves and their fans. They know what they are, and they know what they’re not. And what they’re not is dying for money in the same way an independent artist is. What they are, according to this, are a group of artists who recognize their good fortune. They assert that other artists on their level should recognize similar good fortunes and stop “complaining.”

If this isn’t telling of the splitting we’re starting to see in the music industry, then I don’t know what is. It’s a big day when even mainstream artists are standing up and articulating the difference between themselves and independents. It’s a whole new world.

Lending Artists Millions of Dollars Is a Terrible Idea

The Setup

This morning, Peter Kafka posted an article on a new company seeking to make its name in the evolving music industry: Alignment Artist Capital. The company, according to Kafka’s piece, wants to essentially work as a lending institution for artists who need the money. Except instead of doling out a couple hundred bucks here and there, it will have the resources to lend millions at a time.


A Completely Outdated Business Model

This, for anyone who didn’t already think so by this sentence, is a terrible idea. It’s a rehashing of the same dynamic the record labels have had with artists for decades, sans the ownership percentages over artists’ creative material. Kafka is aware of this as well, noting that, “Alignment isn’t the first entity to advance money to artists…lending money to musicians is one of the core functions of music labels.” [1] That’s very true; lending money to musicians is one of the core functions of a music (record) label, and it’s one of the main reasons their obsolete business model is failing them now.

Don’t be discouraged, though. There’s still plenty of money to be made in the music industry. In fact, it’s on an upswing. But not in the major label space, or using any of the traditional business models of those labels. The new upswing is with the independents—that’s where I would lay my chips.

With all the tools now cheaply (or freely) available to budding new artists, the traditional artist/record label model doesn’t apply anymore (something which Kafka notes as well as “harder to justify”). The reality of the situation is that most artists can get the basic things that they need—access to distribution, access to recording equipment and programs, access to merchandising platforms, access to producers/promoters, etc.—without signing away anything. That begs the question of why they would choose to take a monetary loan if they can do most (if not all) of the necessary things themselves.

New Artists Don’t Need Millions (of Dollars)

And there’s something else: funding an artist (band or solo) like a startup is indeed a unique idea—but a misguided one. Artists don’t need millions of dollars out of the gate to be successful in today’s market(s). The sums of money are too large to apply to most of the new artists who might be interested in taking it, precisely because the economics don’t work in their favor; it’s highly unlikely that throwing a million dollars on your fire will create a lasting fanbase for you. Core fanbases are made on the road, sleeping on couches, driving crappy vans, connecting with your real fans—all things that can be done without a multi-million dollar loan on your shoulders.

In the startup world, there’s a delicate balance between taking VC money you know you’ll need to survive (to the next round), and not taking so much that you end up diluting yourself beyond reason. The same principle holds true here: the concept that new artists should take millions at a time is analogous to a startup raising a Series B when they only need a Seed investment of possibly a quarter of that.

Why Incur Debt You Don’t Need?

AAC cofounder James Diener is quoted in the article saying “We’ll give the artist and their entity financing so they can go build a record label.” That’s like giving someone financing so they can go invest in a line of new and improved floppy disks—i.e. obsolete and irrelevant. The fact that this seems to be one of the main drives behind AAC’s plan tells me that they are still mentally tied to the old model of the record label, only now they’ve decided to cut their prospective losses by dealing only with the financial side (and not the creative one).

Based on my years in the independent music arena, I see these sorts of monetary entities as having a very difficult time breaking into the independent spheres—essentially where they need to be in order to really thrive. Buying streaming services, record labels, summer homes—these are things most artists don’t care about and don’t think about. I suppose a few do, but the numbers of those people are well below anything you can build a real solid business model on. The Jay Z’s of the world are astronomically outnumbered by the independents who are on the rise, now with distribution at their fingertips.

I wrote last week that artists are becoming savvier business people, and I can see them steering clear of these sorts of institutions at all costs. They understand that injecting millions of dollars into their brand image doesn’t buy them fans—that’s a belief propagated by the major label industry. Rather, they know it has to be done by way of live shows, personal attention, and appreciation of core fans; all things which can be done on their own, and without incurring debt (remember my article on crowdfunding?). I suppose there will be some customers of course, but I don’t see this ever catching fire in the independent industry. And that’s the next growth phase of music.

So why would artists incur massive debt if they do’t have to??

I wouldn’t.

Would you?



[1] Notice here that Kafka used the term “music labels.” I have a friend who used to work for Warner Music who explained this phenomenon to me. The reason that the term “music” has replaced the word “record” is because the major labels have become so bloated with an obsolete business model, they need to start making money off of revenue streams that they traditionally never touched: live ticket sales and merchandise sales. Traditionally, their main revenue streams were from record (or CD) sales, hence the term “record label.” Yet in the wake of the massive disruption of their business model, they have taken to calling themselves “music labels” in order to explain their practice of now taking money from revenue streams traditionally left for the artists.

Four Music Industry Posts Refocused

This week I threw a lot of notions and facts about the music industry out there, so I thought I would take a moment today to help refocus on them. Rather than write another post and add to the pile of important things to understand, I thought it better to simply restructure this past week’s posts in an easier, more digestible way of reading them. Here’s a short list for a few posts that went up this week, with a short description of each.

1. Two Stories of Sexism in the Music Industry – Two stories of my own experience that illustrate the sexism and gender inequality in the music industry that needs to be rooted out and eliminated. As with the tech industry, the music business has refocused and taken aim at gender discrimination, but these two short examples prove how things need to be better.

The sexism problem that needs to be solved

The sexism problem that needs to be solved

2. The Lie of “Live Won’t Save Music” – The wonderful adage of “Live won’t save music”—and why it’s a flat-out lie. The dynamics of the “live” factor in the music business (including the economic realities), and why “Live won’t save music” only applies to those artists and music professionals still grasping at the old, obsolete business model. An examination on how people need to restructure their thoughts on the music business if they want to be able to create a new, more lucrative business model.

3. Why Isn’t the Music Business Fully Crowdfunded? – Inspired by some things which I heard VC Fred Wilson postulate during the LAUNCH festival earlier this month. Discussions of the freedom that crowdfunding has allowed artists, and why it’s contributing to a trend towards staying independent. More than that, though, an examination of how artists can leverage the dynamic of crowdfunding for a better return in their own pockets.

4. Tell Me Again How There’s No Monopoly in the Music Industry – A simple chart that shows the incredibly monopolistic spiderweb of the major record labels and their subjects. With SONY in blue, Universal Music Group in green, and Warner Music Group in red, it’s not hard to see how three CEO’s (of these respective companies) essentially control all the music in the mainstream. If that’s not a monopoly, I really don’t know what is.

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The Big Three Major Labels and Their Subjects

The Big Three Major Labels and Their Subjects

New articles coming next week. There’s a lot more in the music industry to uncover, and definitely a lot more than needs to be changed.

The Lie of “Live Won’t Save Music”

The Introduction

Yesterday, I posted my second article inspired by Fred Wilson’s comments to Jason Calacanis during LAUNCH, wherein I focused on his comments about Kickstarter regarding the music and movie industries. The post itself became too long to explain the economics of the paradigm (of the music industry, at least), so I figured it would be better to do so here in a more focused post. So let’s jump in.

The Lie

In the music business, there’s a well-known adage: “Live won’t save music.” This is the argument that many within the established major label machine use to fend off the assertion that free distribution of music would actually help the music industry in the new digital era. The argument is that artists can’t make enough on a live performance to offset losses they would see by distributing their music for free. And in some cases this is true; income from live shows may not be able to offset those losses…for the major label artists, who have huge stage crews, large arena shows, and a long list of people to pay back (not least of which is their record label). 

The Secret

What industry professionals don’t tell you is that live shows are where artists have historically always made most of the money that goes into their pocket. Money from album sales most often gets paid back to the record label and company, whose “signing” of the artist was simply a monetary advance in the first place. In 1993, well-known artist/producer Steve Albini took aim at the expenses squeezed from artists in his essay “The Problem With Music.” Excerpts from the essay clearly detail how the real economics worked behind the scenes.

The Simple Economics

This simple economic reality means two things: 1) That it’s true that major label artists like Beyoncé and Robin Thicke may very well have a hard time making any real money from live shows and will possibly need to continue to rely on the age-old system’s business practices, and 2) That newer, increasingly independent artists can leverage this new business dynamic to their advantage. Whereas their major label peers are essentially tied to the old system (and streams) of revenue, newer artists who are either fully independent, or have contracts with smaller indie labels which afford them more control, don’t need to sell 150,000 albums or fill an arena tour to make a profit. In fact, they will have an easier time of it, precisely because their “stage crew” many times may only consist of a friend from high school watching the merch table.

And this is where Wilson’s comment comes into play, and is exactly right; crowdfunding platforms like Kickstarter and Indiegogo provide a way for artists (both inside and outside the music sphere) to secure funding for that next tour without being on the hook for ~$400,000 in album distribution and tour expenses.

In fact, there are many artists now exploring the possibilities of free precisely as a way to use their music as a means of marketing to jack up the money they’re able to raise on sites like Kickstarter. By using their music as a “free sample” of their brand, artists are able to explore the dynamic of giving their prospective fans a reason to come out and see them live, buy a shirt, bring a friend—all things that are better for them than the money for one album sale anyway. Music is increasingly being used by these artists as major means of marketing and branding, rather than solely as an end commodity for sale.

You can’t argue with math, and here’s reality: How many times are you compelled to and/or do you buy a song or album? Just once. Why would you buy it again unless you had to? But if you examine the same dynamic with respect to going to a show, or buying a t-shirt, suddenly the answer is “as many times as you want.” It becomes a self-feeding cycle, wherein new possibilities are presented by the power of crowdfunding, and not having to go to a major label for the financing. It boils down to simple arithmetic.

The Album You Had to Buy Over and Over Again

It’s worth noting, also, that the established music industry got used to people buying the same album(s) over and over again because they had to. With each subsequent technological change, that Led Zeppelin album you loved so much became obsolete, and thus you needed to shell out more money for something you already had. Buying music on ’45’s became buying the same music again on LP’s, then again on cassettes, again on CD’s, and then again as basic mp3 files (usually off iTunes).

But something happened during that last transformation: music became distilled down to only the information, sans any physical product, and with the power and reach of the internet, distribution costs dropped to zero. Suddenly, the ability to reproduce and distribute music became the cost of 10 minutes of your time, and didn’t even require the kind of distribution networks that record labels had spent decades building, growing and protecting.

And who was it who lost out the most? The demographic that gleaned most of their revenue from physical album unit sales—the major record labels. But the artists now had a new reality in front of them: mass distribution, but without having to indenture themselves to the “physical CD sales-dynamic.” They were (and are) free to make money where they always have: in the live sphere with grass-roots ticket sales and merchandise sales. Thus it becomes clear that the statement “Live won’t save music” is inherently a biased lie. Live won’t save the old music industry, but those within the industry who are adapting to the new terrain are doing just fine exploring the new possibilities before them.

The New Free/Live Dynamic

Those are the people I would place my bets on. They have no stake in the old paradigm, and are happy to push it aside to see what the new free/live dynamic can do for them. This is where the real money in the music industry will be in the next decade. Not grasping with frail fingers at a business model quickly fading away, but exploring with wide-open eyes the opportunities that “free/live” afford both those in the music trenches, and their prospective fans. Don’t be fooled; there’s still a ton of money and opportunity in the music industry. You just need to know where to look.

Why Isn’t the Music Business Fully Crowdfunded?

Last week, I posted an article detailing VC Fred Wilson’s thoughts on investing, in which I drew on a few things he’d stated during his interview with Jason Calacanis at LAUNCH. This time around I want to explore another statement Wilson made during his time on stage which I thought received way too little attention at the time. In fact, I’m quite shocked that more people haven’t really latched onto this sooner.

At one point during the conversation, Wilson mused, “I don’t understand why the music business isn’t fully on Kickstarter,” to which there was some murmuring (I heard sitting in the audience), but no real discussion thereafter of that particular comment. While I was just as interested in the next point that Wilson discussed with Calacanis (the subject of my previous post), I couldn’t (still can’t) get my arms around how something so stark to many people seems to fly under the radar. But before I get too incoherent, let me back up and explain my exasperation.

The wonderful thing about Kickstarter (or any of the other crowdfunding platforms) is the freedom that they give to artists. In the case of the music industry, the freedom I’m referring to is the ability to not have to sign to a major record label in order to have money to finance an album, tour, video, etc. Instead, artists can go directly to their own fanbases and raise the required capital from them, thereby side-stepping the very real consequence of having to sign away some amount of creative control (ever hear of master tapes?) to the major label. As a result of this, artists consequently side-step the dynamic of accruing a similar sort of debt with the label itself. (I will explain the deeper economics at play here in a later post).

The dynamic of crowdfunding has changed the entire paradigm of the music industry. Wilson’s comments struck me so much because of how true they really are. He doesn’t need to be a guitarist in a band to understand that the freedom that services like Kickstarter give content-producing artists is invaluable (clearly the reason he invested in Kickstarter in the first place). His own “I don’t understand why” comment exhibits his understanding of the services that used to be out of reach of artists, which are now readily available thanks to crowdfunding dynamics.

Of course, crowdfunding alone can’t and won’t control an entire vertical like, say, the music industry. It’s one part of a larger mechanism. But it’s nonetheless a shift in the paradigm of music production, distribution and consumption that was previously unavailable. Where crowdfunding really comes into play is when it totally disrupts the age-old adage “live won’t save music” (but that’s an argument for a later post).

Here’s the real point: Fred Wilson is an investor, not a guitarist or aspiring singer. Yet he sees the value of crowdfunding so much (investment interest aside) that he doesn’t understand why any artist would forgo the opportunities presented by these new services. And I’m inclined to agree with him (and I’ve been in the music industry now for years). So here’s the real question: if he gets it, and I get it, don’t you think that all the new artists out there get it too?

It just might be a very short time until the music business is fully (or mostly) crowdfunded.