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Pandora's Box Is Open and the Music Biz Will Never Be the Same

Every bar has at least one guy who is prepared to tell you something about the music business that he thinks you don't already know.

It all amounts to exactly this: The field is full of rip-off artists, sleazy characters, phonies, and middlemen out to wring every dime from content that doesn't really belong to them.

Like a good country song, the details change but the stories stay the same -- trucks and a heartache.

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The problem with that speech, of course, is that it's true and everybody knows it. The music business as it stands right now, as it has stood for decades, is a rip-off. It can be more or less effective, it can represent artists and serve the listeners better or worse, but in its present form it can't be a truly honest business.

This is because, as I said in last week's column, music isn't a commodity. It's not a product that can be assembled in a production line or held in your hands. It's something that comes naturally from every living person -- some better than others -- and can be enjoyed by every living person, for free as long as the musician is willing, with no other assistance needed.

The standard business model, perfected in the age of vinyl recordings, presented music as a tangible thing -- a record -- that a businessman could manufacture and sell like any other widget. But the music on those records is only a captured bit of the ephemeral, constantly changing musical experience.

A Bruce Springsteen song is never exactly the same two concerts in a row. A performance of Beethoven or Bach sounds different depending on who is playing, and were those composers themselves to play their most famous music for us, we would likely hear shocking differences from the versions we know -- more radical than any modern interpreter would dare.

The experience of music is determined by its creators and by its listeners. By definition, it is never completely recreated, but is created anew every time. It happens in the moment and will change in the next moment.

The traditional music business, built around the sale of fixed music recordings, handles manufacturing, packaging, and distributing, middlemen selling something they didn't make themselves, something never really theirs to begin with.

These days, though, tech is trashing that model, by fits and starts turning the business of music from a product-based market into something more like a social media service directly connecting artists and listeners.

As I noted in my conversation with composer Bob Ostertag, artists are wrestling with the new tools, using the freedom the Internet provides to bypass the middlemen entirely and using sales platforms like Apple's (NASDAQ:AAPL) iTunes, and CDBaby, social media audio-exchange services like SoundCloud, and Internet radio pioneers like Pandora (NYSE:P) and Spotify to reach greater numbers of potential listeners.

While recordings are still the primary currency of these artists, more and more are emphasizing the recordings as calling cards, samples of the more true, live experience.

All Business Is Tech

TheStreet's Rocco Pendola has been pointing out how technology affects local business. In his piece Monday, he speculated Pandora could offer artists and concert-goers dynamic tools to build their relationship, exploiting the company's deep databases of user information and music content to post ads and opportunities for ticket sales to specific users for local events.

In an earlier video, Pendola pointed out that local businesses can compete on a local level with national chains, like Starbucks (NASDAQ:SBUX), if they develop or partner with tech to build more responsive relationships with their customers.

These ideas are simple, but very powerful. Music is inherently live and therefore inherently local. The future of the music business is not in product sales, but in the service of that artist-listener relationship. Artists are thinking about tech. They're embracing it and using it to reach their audiences directly.

While all of these new technologies have their roots in traditional music marketing -- radio, record stores, mail-order houses and record clubs, publishers, etc. --noneis modeling itself on traditional record labels. That space, controlled right now by fewer than a handful of giant corporations, including Sony (NYSE:SNE) and Vivendi (EPA:VIV), will soon be dead.

Even now, the major labels can really market only the biggest draws, the acts competing for the top spots on Billboard's charts. Anything that can't sell hundreds of thousands of albums is not on their radar. Funding for the development of artists, for tours, for studio costs -- all of that is long gone.

The music business will probably rebound from the current rout and reestablish a new role for middlemen, but only after the landscape has settled and the new technologies have become common currency. Small labels that will add value to the experience through artist development will spring up, using the same distribution technologies as the artists themselves.

Virtual media technology will continue to improve, allowing even closer representations of the live music experience.

In the meantime, companies that don't necessarily represent artists but are, instead, working to expand the direct relationship between artist and listener are the surest bet for the future of the business.

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