It's beginning to look like this will happen in any market that features:

1) A low barrier to entry, such that many people can offer their product.  And therefore you have hundreds of thousands of competing artists, programmers, writers, painters...whatever.

2) Buyers have to sort thrugh hundreds of thousands of similar products.

The only way to grab market share will be with $millions of dollars  in advertising spend to make a reasonably good product "stand out" and grab a big market share.  People buy what they "hear about". They won't search too long through mountains of similar, average products.

WORD

You are absolutely 100% right on that statement. 

Music to my ears

Yes, this seems to be true, both in my own experience in searching for things, and watching my customers dwindle because it's hard to stand out.  In the old yellow pages, my logo caught people's attention, even in a small ad.  People were 'scanning' a page.  But they don't 'scan' a list of fifty companies the same way--they click on the top five.

In my business, I'm finding that if I don't want to spent $800 on adwords with Google, then I need to have reviews.  Reviews give people a reason to click on your listing.  This has not helped my CD compete in the music world, but it has helped my other trade.

This is really nothing new...

Long before iTunes, mp3's, and ipods - back when Apple made computers only art majors used there were pundits predicting this new 'Internet' thing would be a utopia for programmers.  We would all be self employed, making good money with this 'shareware' stuff.  Obviously, that didn't pan out and the market is still dominated by big players - MS, Apple, Adobe, etc.

Then photographers had to scramble as 'websites' sprang up all over, using stock art photos without paying for them.  Again, that industry ended up rallying around a couple of major players - getty images, iStockPhoto, etc.

Then everyone was supposed to get rich 'blogging' and raking in money from advertising. (How's that working out Paul ? Got the house in Beverly Hills yet ?)  And yet again, everything standardized around a few big players (actually, a couple of big sites per sector/interest)

Finally, things like the kindle and mp3's really hit...Funnily enough, traditional publishing houses seemed to deal well with ebook readers while major record labels still seem to be trying to find a model that works.

One commonality that surfaced among all these groups (geeks, photographers, bloggers, and mainstream artists) was that 'free content' was here to stay.  Everyone of these groups has thousands of people willing to give their work away for free.

Geeks have arguably had the longest time to work thru the kinks in 'free' content.   Open source / Free software is now very common, used everywhere from small companies to Fortune 500's.  Many people (myself included) have managed to make a decent living on 'free software'.  There are legions of photographers, graphic artists, bloggers, cartoonists, etc.  that give their content away with the goal of making a living thru advertising, consulting, auctions, and who knows what else.

Its important to note, that the lifeblood of these efforts is exposure.  Regardless of whether your an Open Source project or a new band, if you can't get traction its game over.  Open source uses sites like http://freecode.com and http://slashdot.org to try and keep track of everything.  But even for someone like myself, that works with it all day, everyday - its impossible to keep up with everything being released.

Anyway, I guess the big take away here is that what's happening in the music industry isn't much different to what happened with geeks or non-music artists.  Might be worth looking at how they resolved their issues to see if any of those techinques are applicable to music ?

The Open Source model does not currently work for musicians and music artists.

Why?

Like music, with Open Source a good highly rated program attracts attention to the programmer. The more the program or programs they create that are rated highly, the more the programmer comes to be in demand.

But ...as the programmer becomes more highly rated the number of employement opportitiues arise with corporate entities whether contracts or full-term. The open source programs become their meal ticket. The corporate entities who employ them, the Microsofts, Apple etc., produce software which is vigorously protected by their patents.

Now why does this not currently happen in music....

In the past the people who would "employ" musicians were corporate entities such as record companies. To do so they needed to be able to make money and have money available to invest in artists. They used their existing financial resources to make that investment. Unfortunately, the mass widescale profiteering of of others creative copyright works has reduced their income levels, there is less available cash to invest in new artist and that model is dying.

Meanwhile, the same entities who employ the open souce programmers, the Google's and Apple's have a vested interest in making music, available as cheap or free. Google because it drives their ad networks, Apple because it enables them to sell their hardware.

Currently, the technology guys are making out like bandits and there are plenty of employment opportunities for good open source programmers while converserly there are fewer entities willing to invest "employ" music creators.

This will continue to be the case unless we can get a handle on controlling the mass profiteering of others creative copyright content in the same way that the technologist protect their patents.

"But ...as the programmer becomes more highly rated the number of employement opportitiues arise with corporate entities whether contracts or full-term. The open source programs become their meal ticket. The corporate entities who employ them, the Microsofts, Apple etc., produce software which is vigorously protected by their patents."

Not quite sure where you get this.  I've made a living working purely with Open Source for over 10 years, and I've encountered _very_ few programmers working MS, Apple, etc.  Typically, we collaborate on Open Source so we can compete with MS, etc. By pooling our 'resources' (brain power) we can produce software better then any individual member could afford to produce by themselves.  Perhaps some sort of similiar pooling would be helpful in the music space.

The other thing you never see addressed is _legal_ free content is here to stay.  Jamendo.org currently claims over 350,000 free tracks and thats just 1 site.  From here on, paying for content will be optional - just like paying for software is largely optional now.  The question is, how to get consumers to want to pay and support their favorite artists.

That seems to be the $64 million question...

(and before anyone complains that most free music is crap...

I'd hardly call lady gagga or katy perry 'high art' - but the masses sure seem to like it... )

"Not quite sure where you get this.  I've made a living working purely with Open Source for over 10 years, and I've encountered _very_ few programmers working MS, Apple, etc.  Typically, we collaborate on Open Source so we can compete with MS, etc. By pooling our 'resources' (brain power) we can produce software better then any individual member could afford to produce by themselves.  Perhaps some sort of similiar pooling would be helpful in the music space."

My understanding of open source is from:

http://opensource.org/docs/osd

It is free, free distributed, free of patents.  My understanding is that incomes are made in general from Support Contracts, Value-Added Enhancements, Documentation, Binaries and Expertise as a Consultant. I'm using the word employment loosely viewing these as labor related.

So I am intrigued. If it's not labor related then perhaps these is something the music industry can model. How exactly are you making a living with Open source? Where and for what is the money coming from?

"It is free, free distributed, free of patents.  My understanding is that incomes are made in general from Support Contracts, Value-Added Enhancements, Documentation, Binaries and Expertise as a Consultant. I'm using the word employment loosely viewing these as labor related."

Correct - I was specifically questioning your statements about working for MS, Google, Apple, etc.  Most Open Source people I know work for small shops or are self employed. And yes, most Open Source revenue revolves around labor of some sort. Support, implementation, etc.   While the actual revenue streams would be different for music (and finding them is the million dollar question), I do think the 'collaborative' nature of Open Source is something that could be useful.

I see a real similarity between the software industry and the music industry.  Both are dominated by a few 'big players' with lots of 'lil players' vieing for attention/market share.  Open Source gave smaller software companies a way to 'level the playing field'.  Perhaps a similiar collaborative approach would help small labels and independent bands ?

(One thing I've always wondered, if independent labels / bands aren't happy with the payouts from YouTube, Spotify, etc. - why not start their own service ?  A 'by musicians for musicians' sort of thing? There seem to be lots of independent labels with lots of acts that could participate ? )

"Correct - I was specifically questioning your statements about working for MS, Google, Apple, etc."

Yes they were bad examples.

"While the actual revenue streams would be different for music - finding them is the million dollar question"

Yes that is the million dolllar question...

The problem for music, is that music is the product. Period.  T-Shirts, Tours, Merchandising are in the main perpheral to the main product - music etc.,

In my opinion that is where is is a major difference between software industry and music.

What is also missing from the picture is the cost associated with producing and marketing musical content. In the past record companies were the venture capitalists of the music world, they invested in artists, they put the money up front. Crowding funding may work for musical artists that are good marketeers and self-promoters, but many musicians and artists do not fall naturally in to this category. The issue is music is loss making at the moment. The product is being so widely stolen that as commercial proposition music has almost become a non-starter.  For survival the big boy record companies are taking two strategies:

1/ Invest in small number of top tier artists and massive promotion (The water cannon approach - you'll loose some water but as least you put out the fire)

2/ Repackage box-set back catalog items using mixed media - App, DVD, music etc., (The complete package is much harder to pirate)

In the end it comes down ensuring that all musical content creators and rights holders are compensated and not those that profit by ensuring that the content is as free or cheap as possible. Until we can get a handle on that, we are designing chocolate teapots or inflatable dartboards.

Here it is again

http://www.youtube.com/watch?v=KZazEM8cgt0

 if independent labels / bands aren't happy with the payouts from YouTube, Spotify, etc. - why not start their own service ? 

I believe it has been done with limited success or if they become successful they roll over and sell out to major labels.

Maybe I am wrong?

In a word: piracy.

There is little, if anything, that an artist-run service could offer that a pirate service could not (for our purposes, YouTube is also a pirate service because of the vast amount of unlicensed content). This means two things:

1. The service isn't likely to be able to make money by charging its users, because they can get the same stuff elsewhere for free,
2. Given the amount of competition from established "purveyors" of the same content, it is also unlikely that the service would be able to attract enough of an audience to be able to subsist on advertising (especially given how cheap internet advertising is) - hell, the difficulty of attracting attention for new market entrants is what we're discussing here.

In other words, the only thing this would achieve is to add yet another financial burden for the already-straining artists/labels.

If you're interested in a more detailed discussion of these issues, here are two of my posts that elaborate on them:

1. Copyright and the Little Guy Part 2 – Copyright and Competition Redux
2. Pirate Economics
   

I COMPLETELY disagree with this article, I have two apps on the app store, neither of them are anything special so didnt expect them to get very many hits. Additionaly I havnt pulled ANY marketing schemes at all, all of my downloads are from people managing to find my apps and then downloading them, i addition they werent just downloaded a few times, but to date over 500 total hits. So your ap would have to be either really terrible or virtually invisible to the consumers. Now one other thing is that both of my apps are free, I can believe that all of the above is true for PAID apps, not true for free apps. thanks, also for more info on my app downloads you can visit my website http://www.bendthebasics.com/

I should just stick to lurking...

Sorry about that

I, for one, enjoy your realism and cynicism, keep posting.

Thanks !  Sometimes I think I need to cut back on the coffee...

Sorry - starting a new comment since we crawled down the edge of the page...

"

1. The service isn't likely to be able to make money by charging its users, because they can get the same stuff elsewhere for free,
2. Given the amount of competition from established "purveyors" of the same content, it is also unlikely that the service would be able to attract enough of an audience to be able to subsis..."

I was sorta thinking about a multi-label _not-for-profit_ site...

Something that a number of independent labels could ALL use to promote their acts.  According to wikipedia, Merlin Network alone has over 12,000 members.  If each one kicked in $20 one-time, you'd have $250,000 to build the site, and provide initial funding (hardware, bandwidth, etc.)  Assuming modern web techniques, and a scalable architecture, this would be more then enough to produce something that could scale out as it became more popular.  Advertising revenue might not be huge (especially initially during ramp-up), but should be capable of off setting the cost of bandwidth and say 1 or 2 full time webmasters.  As the site grows and requires more resources, the advertising revenue should grow, allowing the site to be at least break-even.

Any cash left after that over head would be distributed to bands on a per stream basis.

Treated as a mechanism for distribution and exposure, rather then as a 'for profit' enterprise, I would imagine it could pay much better rates then things like spotify or youtube which have to make a profit ?  It might not generate the same _volume_ of streams a youtube or spotify does.  But the per-stream could be higher, and the reporting could be totally transparent (something the industry seems to have had issues with in the past? ) 

Again, this is premised on the prediction that steaming will never be enough to fully support a band, and will gradually be used more as a 'teaser' or 'upsell' opportunity to sell concert tickets, and physical goods? (i.e. unless you've already 'made it', you won't generate a living wage soley on streaming, the number of required streams are simply beyond what most 'unknown' bands can generate...)

If you don't treat it as a for-profit enterprise, there's no point in doing it in the first place - you can get exactly the same results with Spotify et al.

The whole problem is that there is no profit to be had anywhere at the moment - recordings are hopeless at the moment, touring actually costs more money than it makes and only around 10% of fans buy merchandise. If you have no certain way of making money, then the last thing you want is more costs.

The only way forward is for people to start paying for music again.

95% of all music tracks on iTunes are never downloaded

I COMPLETELY disagree with this article, I have two apps on the app store, neither of them are anything special so didnt expect them to get very many hits. Additionaly I havnt pulled ANY marketing schemes at all, all of my downloads are from people managing to find my apps and then downloading them, i addition they werent just downloaded a few times, but to date over 500 total hits. So your ap would have to be either really terrible or virtually invisible to the consumers. Now one other thing is that both of my apps are free, I can believe that all of the above is true for PAID apps, not true for free apps. thanks, also for more info on my app downloads you can visit my website http://www.bendthebasics.com/