This sounds naive. The people running the labels are very cynical, and the way they're compensated makes them even more so. They don't have equity. They're motivated by bonuses that come out of this year's revenue. So they're not interested in building stuff. They just want to extract large amounts of money, this year, from whoever they can.
But why can't this change over a period of time as physcab has indicated (who by the way, works/worked for one startup leading the charge)? I believe it impossible for the industry to fail--there will always be people making music. So the big four are either going to have to get with the program (and probably significantly reduce their market cap), or get the hell out the way.
This is in someways analogous to what YC, super angels, et al. have done with venture capital. Just like ~$20,000 is about all you need to get a talented founding team started, musicians today can do things on the cheap just as well. The entire system no longer hinges on the $100M home-run in either case.
Everyones been focused on investing in the killer app that will bring the music industry back to equilibrium. The Spotify's and last.fm's will certainly play their part, but its a fundamental shift in capital structure that the industry needs. Making it as a musician is, never has been, nor ever will be easy. There's extremely talented people out there though that, given a little cash and a little support, have the drive and persistence to make a career for themselves. Sans record label.
Yes, perhaps thinking the labels changing their ways (or hoping they do) over time is naive. I'll admit that (but I'd like to say optimistic instead).
What the music industry needs is a platform where unsigned artists can go to promote their music without the help of the labels. This platform could probably act like a label, but better serve the artists and users. It would have to garner a lot of eyeballs so it could effectively break artists into the mainstream. It would have to be smart at targeting a specific demographic of listeners so artists could know where to travel and know they can fill auditoriums. Lastly it would have to be a tech company, so the Platform would be in the hands of every listener.
MySpace might be able to do this if they gave up on the social network thing. There certainly is room though for a new company to have this role, but it is going to be a long and painful process. And you certainly shouldn't do it for short term gain.
The idea of simply creating a different distribution mechanism (eg CDBaby) for unsigned artists so that they don't have to sign with a major label is popular with the tech crowd, but fundamentally flawed. It assumes that unsigned artists can all produce well recorded, popular music on their own.
Most can't.
A good producer can pick a rough artist or band and get something popular out of them, but it often involves both mentoring and investment in recording and promotion upfront before any opportunity of return. Note I deliberately use the word "popular" rather than "good" (which is subjective anyway) because clearly as a business "popular" is where the money is. The "long tail" theory is fiction. Music is a hits business where most of the money is made by a relatively short fat body of popular music.
Many of the most popular "artists" are created from scratch by producers. Where do you think Britney and the Spice Girls came from? Like them or not, the revenue from hit music funds the production of new acts who haven't become profitable yet.
Another flawed assumption is that everyone wants to listen to new music. A lot don't. So you have a large body of recorded music that the record labels will never give up or let you sample or remix without a hefty toll. And as soon as any new act gets popular, you can bet they'll be offered a seat at the "big 4" music table. It's the DeBeers business model applied to music.
Personally, I think what the radio station JJJ in Australia does with their unearthed site (http://triplejunearthed.com/) is an excellent model for identifying quality artists. The next step IMHO is a ycombinator style production startup company that invests in developing the most promising acts to become popular and then offers all the recording, promotion, management and touring services that the labels do but on just terms. Distribution is just the last piece of the puzzle.
Your analysis is flawed in that you're only assuming the popular ones are successful. Do you also think successful companies are only those that are used by millions of users?
Its true that the endorsement approach only works for popular artists, but everyone else can take the Youtube approach and let their content speak for themselves. Plus, not every artist wants to be mainstream popular. A lot of artists just want to get their music heard and know more about the people who listen to them. They make their money by touring and merch just like the popular ones do.
And artists don't need a lot of capital anymore. Yes, labels sink enormous sums into the production and marketing of a track in the hope they have a Lady Gaga hit, but I think you'd be surprised by how many successful artists there are that have chosen to go their own way and do just fine.
Hell, I'm looking at the data right now its its quite convincing.
I think we're discussing different things. Clearly there are plenty of independent artists - punk rock has a long tradition of independent label publishing going back decades for example. Anyone who just wants to put their music out there now is well served by distribution providers like CDBaby.
I'm talking about successful disruption of the established music industry and the oft mentioned suggestion that simply offering artists a distribution alternative will do it. It won't. We've had a decade for grassroots indy web publishing to take over and it hasn't.
My point about the long tail isn't that it doesn't exist, but that it's largely irrelevant. Just as Youtube has barely scratched Hollywood, indy music publishing isn't moving the profitability needle of big music enough for them to care. They still have the back catalog, they continue to acquire the vast majority of popular artists and they're still driving the creation of the most popular music which is where the money is.
http://soundcloud.com definitely forms part of this. Especially when you link it up to Facebook via the http://rootmusic.com service. These three are basically the holy trinity when it comes to unsigned bands promoting themselves these days.
What I've been wondering is why Apple doesn't pony up and do just that.
They could say "Hey artists not [yet] on a label, join the iTunes Label. We're a great distribution channel, and we'll give you a 70/30 split."
OK so it's a bit far-fetched, and it really depends on what iTunes-as-a-label would provide (but with GarageBand/Logic/CuBase who needs tons of financing?). Really the only thing iTunes doesn't have a great story for would be touring (but even then, what better way to sell concert tickets than through iTunes/Ping?).
Because record labels are more about promotion than distribution (anymore). Amazon, cdbaby, etc. can all already do this.
Honestly, the artists don't even need those people anymore. I've seen artists who sell their music directly on their own site, and I don't see why more can't.
Also, as part of this cynicism, the labels are very good at having people that seem like the kind of people that are on your side. I.e., the kind of people that "will go to bat for the artists."
