This month, we revisit some of our favorite sources to ask where the musicbusiness is headed.

Brad O’Donnell, A&R guru of EMI CMG, says, “Music has never been more important to consumers, and they’ve never consumed more of it.” But the 60-year-old method of making physical records or CDs is just about extinct. “The people willing to innovate will be the winners in the new music economy,” says O’Donnell.

So what’s that mean? First, it means listening to what consumers want rather than suing them and trying a variety of new routes for delivering music to them. “We’re moving from an era of CD sales declining and [labels] trying to protect that (RIAA lawsuits, etc.) to…an era of experimentation” with lots of different models for delivery and payment.

“The 18 to 22-year-olds I know don’t buy CDs. The next generation will purchase online,” continues O’Donnell. Of the umpteen ways to do that, “I don’t see a clear winner yet.” He predicts a buffet, mirroring the movie industry’s options, including theaters, rentals, downloads, pay TV, Netflix, etc.

Centricity’s John Mays sees a move toward more free music. “So much of what I’m reading and hearing people talk about is free,” says Mays, referencing the much buzzed about Q-trax, a proposed ad-supported streaming music site whose much-touted launch fizzled. “Growth in bandwidth and data storage are moving us that direction. If that’s it—ad supported music—how is that going to change everything?”
A lot.

“The Radiohead thing was a big [sign] pointing to this,” Mays continues. “We’ll see more high profile artists make their work, or part of it, available for free.” He says Mac’s new Mac Air notebook is another omen: it has no drive for CDs. “Steve Jobs sees no reason to have a physical piece of anything.” And if for-pay music continues, “the download card—the thing you see at Starbucks with the album art [and] a code on it—will get more popular. You buy it and just go download it.”

Derek Webb may become the poster child for free music: he gave away nearly 100,000 downloads of his Mockingbird (INO) project last year. “It was a turning point for me,” he says. “At almost every show, without exception, in the following months, you really felt it. In towns where we would have had maybe 200-300 people, we’d have 600-700 people.”

The challenge, he says, “is finding a way to monetize the free music and making connections with the people who take it,” so you get them out to your live shows, etc. “Giving music away can give you opportunities to make money other ways,” says Webb. He thinks that successful artists will learn to use freebies to stir a “brand affection” in new listeners, just as companies do by giving away free products.

Gospel industry vet Monica Coates, who wrote the book on gospel music (literally; it comes out later this year), forecasts artists becoming more “purveyors of a lifestyle with music as a vital part of branding that lifestyle.

“People are buying fewer CDs as part of their entertainment mix and more songs as accompaniments to their lifestyle,” in a variety of formats (downloads, ringtones, videos, etc.). Because of that, Coates says, “Artists will have to rethink CD sales as a source of revenue and put more time into developing a relationship with their audiences.”

Both she and Webb say it’s difficult for a big label to adapt to the changes we’re seeing. Where he advocates the do-it-yourself route, Coates says record labels are “increasingly unable to deliver on a major part of their traditional role in partnership. Unfortunately, big machines find it difficult to innovate when the bulk of their attention must be given to basic questions of survival.”

However, she says, “Most artists are probably not better off without their record labels, but they do certainly have to bear a larger burden in their careers. The days are gone when you can simply turn in your album and trust the machine to promote and sell it for you.”

The overriding trends seem to be toward more choices for consumers, more options for artists and more challenges for labels. Interesting times, my friends.

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