future of musicThe music business has always been tough and a little sleazy.  It’s even tougher these days — but probably not quite as sleazy.

You may have heard that CD sales are down and paid downloads are not picking up the slack.  What you may not have heard is that licensing fees are also down.  The reason for each phenomenon is the same:  Supply is high and distribution channels many.  Anyone can record a professional-sounding album these days.  Anyone can review and promote.  Anyone can distribute.  It is also becoming known that anyone can write and perform music, though some have more of a gift for it than others.

Sales are down because music can be shared so freely these days.  It’s not just peer-to-peer networks, either.  It’s so easy to e-mail an mp3 to their friends.  It used to be that you had to go to the trouble of making a tape or burning a CD.  Those days are gone.  Now you just hit the “attach” button and the send button.  Or you just go on your favorite p2p network, and all the music in the world is available to your for free.  It might be “illegal,” but it is also a fact of life.

In business, we are best off dealing with things as they are, not as we would like them to be.  How can a talented artist make money with things as they are?

Things will become more granular.  Rather than a huge record company controlling everything, it will come down to individuals or small units of people cooperating.  Those who cooperate the best will win.

A recording studio and engineer might cut a deal with an artist or their manager to record an album.  Probably, the costs of studio time and engineering will be paid up-front.  This is the hard part because it will be difficult to sell the finished product.  The finished product will make its money through licensing.  Licensing will be handled by publishers and managers.  So if we have a four-person band recording in a small studio, only a limited number of people need to be involved with any project:  The band, the engineer, the studio owner, the promoter, and the publisher.  If a hit comes out of it, all those people can make money.  Trimming the fat of a huge record company, this means that everyone can make out well, even with a much smaller pie (licensing and limited download and CD sales).

For artists and promoters, the real money will be made the old fashioned way — it will be earned through performance.  The recorded music will not be a commodity but an advertisement.  The more a song gets downloaded and shared freely, the better for the artist. If a song gets played on a million iPods for free, that represents a potential million concert tickets sold.  Each concert ticket sold represents hits to a website and merchandise sales.  The “platinum record” is a thing of the past, but the platinum song will always exist.  A good song will make you money, but you have to get out there and play it.

In the old model, it was the other way around — tours were used to promote albums.  That will still be the case to some extent, but the album sales will take place in the form of high-quality downloads or CDs hustled directly through the artists’ websites.

Ultimately, this will be good.  The cream will rise to the top, not through radio play and payola but based on what people like and what they share with each other.  The total pot will be smaller, but the number of people eating out of it will also be smaller, and there will be more pots.  Instead of 10 big stars hogging the charts, there will be hundreds of smaller stars making a very good living.

That’s how things are shaping up.  One thing is for sure: Wandering minstrels always find a way to make a living.