Out With The Old, In With The New: How Innovation Has Completely Changed The Music Business

from the big-changes dept

Tue, Oct 2nd 2012 9:26am — Mike Masnick

Jeff Price, who was recently pushed out of TuneCore after building one of the premiere new tools for musicians to take control over their careers, is continuing to think deeply about the state of the music business, as he figures out what's next. He's penned a really fantastic piece that explores how technology and innovation have completely disrupted the old recorded music business hitting on a few key points. I'd recommend reading the whole thing, but I'll highlight a few key snippets. First up, he notes the general shift in the music business from a world where artists were completely at the mercy of gatekeepers to one where that's no longer the case, almost entirely due to technology.

Until recently, the music industry provided artists one path, and one path only, to reach and connect with their fans and monetize their pre-recorded music. Artists had to sign to a record label, transferring ownership of copyrights, relinquishing exclusive artistic control, and giving up most of the revenue from the sale of their recordings. Fans could only buy pre-recorded music in physical form from retail outlets from the limited number of artists that labels chose to anoint. Labels were aware of their unique position and took full advantage of it by gouging both artists and music fans.

He goes on to point out that the reason the labels were able to do this was because of four key factors that only the major labels could really provide:

Four main reasons: barriers to recording, manufacturing, distributing, and marketing music were virtually insurmountable.

However, he notes that all four of these areas have been disrupted by new technology, and that process is continuing, such that the key advantages that the major labels have continued to rely on are slowly disappearing as well:

First, it’s far cheaper to record now than it ever has been before. In addition, the level of expertise needed to record has dropped considerably. With a laptop, some one-time purchases of software and some hours to learn how to use it, a home recording studio can be created for the cost of one day’s recording at a high-end studio.

Second, in the digital world there is no up front cost or risk to manufacture inventory. The music is available in unlimited quantity as a digital file that replicates on demand only after it’s bought or accessed to stream.

Third, music fans have shifted from buying CDs in stores to buying/streaming music on-line. Now an artist, for a nominal fee and the click of a button on a website, gets an unlimited amount of self-replicating inventory with no up front cost into the world’s largest music retail stores (i.e. iTunes is larger than Walmart ever was), all while keeping their copyrights.

Fourth, there is now equal access to music discovery outlets – YouTube, blogs, Slacker, Pandora, Spotify, digital music stores’ discovery features, Twitter, Facebook and other social networking applications are open to everyone, not just the elite few artists signed to labels. The only media outlet not open to everyone is commercial radio, but with that going the way of the 8-Track over the next few years, the last stranglehold of the traditional music industry will be gone.

Because of this, you no longer are required to deal with a major label. The majors do still dominate radio play, but the piece also digs in (in great detail) as to why Price thinks terrestrial radio is about to be completely destroyed by technology as well (think: once interactive streaming is standard in cars and on phones...). But the major labels haven't done that much to adapt to this pretty massive change to their market. And that's caused them a lot of problems (as seen in their bottom line). Of course, rather than admitting their own failures in adapting, they've basically tried to blame pretty much everyone else. Price highlights the ways in which they've tried to cope:

Sue music fans for copyright infringement

Create more onerous agreements between labels and artists requiring them to give up even more of their copyrights, not fewer (the infamous “360deals”) while providing less value.

Use antiquated royalty accounting systems and provisions to slow down or reduce royalty payments owed.

Stifle innovation under the guise of “protecting” copyright (As one example, the majors made it a condition that they must own a piece of Spotify in order for Spotify to have access to their music).

Killed artist development and long term careers in a mad dash attempt to make money as quickly as possible.

Feed the media as much false information as possible (i.e. the entire music industry is dying) in an attempt to discredit, slow down and delegitimize the new emerging industry.

Of course, almost every one of these moves actually does more to hurt their longterm sustainability than to help it. Basically, every one of these moves has been bad for both consumers and artists -- and that's no way to adapt to the digital era. Price notes that the transformation from the old era to the new digital era is now "complete," as the key things that made the old record labels so powerful is almost entirely whittled away by technology. That doesn't mean that innovation is over, by any means. As is typical in times of disruption, many many artists are still struggling greatly to figure out how the new world works. The rules have changed drastically (with many new ones being written and rewritten on the fly). There are plenty of failures, but a growing number of success stories. And that should only increase as more people learn to harness these new technologies and services, realizing they're not quite as scary have some have made them out to be. But there is a learning curve and it's a painful curve for some.

Either way, it's great to see Jeff lay out all of this in one place, and it shows that he's still thinking about the nature of the industry and where it's heading next. While many from the old industry still look at the future and try to figure out how to hold it back, more and more are realizing that the right play is to move forwards, quickly.

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Filed Under: changes, evolution, innovation, jeff price, music industry

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Scott, 2 Oct 2012 @ 9:54am

Sooner The Better
Sooner the better things evolved the sooner we happy. I remember in high school how I got sick of Britney Spears and all those boy bands,That stop watching MTV and that stop listening the radio because some stations play the same BS. The Internet allowed me to discover new artists but the same time when Music was still on MTV I discovered 2 of favorite bands but Other times it would be other places I would discover them.
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Ninja (profile), 2 Oct 2012 @ 9:54am

I'm guessing none of the labels will be left out to die. But as their businesses wither due to all those poor lines of action described by Jeff their value will go down and down till the point some of them will be bought and merged into a bigger company and the bigger ones that have deeper pockets behind them (ie: Sony, UMG) will be forced into shifting their positions in order to stay afloat.

I'll risk a prediction: in the future they'll be case studies just like the railways, the buggy whips and ice cutters are nowadays. And by the time they become case studies, some of the current industries that are innovating now will be following the same path.
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Josef Anvil (profile), 2 Oct 2012 @ 9:58am

Tangent
As the next generation of musicians realizes that they do not have to give up their copyrights, the powers that be may begin to realize that life +70 years was not such a great idea.
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Anonymous Coward, 2 Oct 2012 @ 10:07am

Anyone want to bet this is the point where Lowery's sycophants chime in to claim that Jeff Price is an idiot, and even though Lowery hates having anything to do with major labels he'll still defend them to the fucking bitter end?
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Another AC, 2 Oct 2012 @ 10:15am

Still Waitring
For someone to explain to me how I can make my millions in the new system!

Wait, do the dissenters around here still say that anymore? I can't recall having heard it in a while now... Hmmm.
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Zakida Paul (profile), 2 Oct 2012 @ 10:25am

Re: Still Waitring
How does a very talented musician who perhaps doesn't have the right look or doesn't play a 'commercially viable' sound make their millions under the old system?
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Chris Brand (profile), 2 Oct 2012 @ 10:26am

except one thing
"the key things that made the old record labels so powerful is almost entirely whittled away by technology" - all except for money, and we all know that money = power. Unfortunately, it'll take a while for the money to run out.
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Ninja (profile), 2 Oct 2012 @ 10:27am

Re: Still Waitring
how I can make my millions in the new system!

It's still building so it's hard to tell exactly why but there are a few examples that made quite the buck:

http://www.techdirt.com/blog/casestudies/articles/20120704/02451119578/louis-cks-direct-tou r-sales-over-6-million-1-week-scalping-drops-25-to-below-1.shtml
http://www.techdirt.com/articles/2 0120917/22370320414/amanda-palmer-destroyssaves-musicians-chances-hitting-it-big-as-artist-remain-un changed.shtml
http://www.techdirt.com/articles/20120531/16214619156/latest-humble-bundle-pay-what-y ou-want-indie-games-raises-1-million-five-hours.shtml
http://www.techdirt.com/articles/20101004/021 72611272/minecraft-s-developer-making-350-000-100-000-per-day-updated.shtml
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Zakida Paul (profile), 2 Oct 2012 @ 10:28am

Re: Still Waitring
PS people like Amanda Palmer and Jonathan Coulton could answer your question.
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Violated (profile), 2 Oct 2012 @ 10:34am

The World Turns
That was a nice coverage of the situation when yes technology has much changed the music world leaving these old industries close to obsolete with an expensive architecture that still needs to be paid for.

While we can welcome in the new music era of lower cost music in a market of vast choice we should also keep in mind the few music labels still alive within the RIAA when since they control almost half the music market still then this still makes them a powerful force. We have the likes of SOPA, PIPA and more (like DaJaz1) as evidence of their aim to seize much greater control of the new music market to bring it back under the RIAA umbrella.

Their decline will of course continue but my point would be since Indie music is now the majority force then the RIAA won't be opening up their doors to represent the majority music of America because we well know who exactly is paying their millions in wages and political lobbying expenses!

If musicians are to control their own destiny then they do need representation on all levels of music market policy. You are now a bigger collective than even UMG so go and use it.

Radio and TV stations are of course a problem when this is an old market promotion system. Things do not need to be this way when we only need to lock everyone in the same room until they have figured out a new system. It is either that choice or to wait until technology passes them by but keep in mind that these media outlets can often be monopoly market gatekeepers bigger and even worse than the RIAA. They sure won't be going down without a fight and regulation over Internet services would be a real risk.
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Anonymous Coward, 2 Oct 2012 @ 10:47am

Something I miss
I know, I'm old. But hear me out. I miss the possibility of turning on a radio, and having a DJ, someone who is professionally paid to know about and introduce us to cool, new music, show me new stuff. When I was young, that used to be a way to discover new stuff.

I don't want something quite as "active" as a service where I end up having to "rate" every song, I just want someone to say, "here's a bunch of stuff in a row you will hopefully like, and can easily tag to DL later." Losing radio (which happened a LONG time ago) as a method of doing that (other than college stations) is a PITA.
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Violated (profile), 2 Oct 2012 @ 10:55am

Re: Still Waitring
You may want to ask how many of those musicians who sign a contract with a UMG label actually pay some of their earnings to make Lady Gaga as rich and powerful as she is.

That is how the music industry works making their "stars" so every new musician can dream of being the next Lady Gaga so they also sign a contract with a UMG label.

It is a mugs game when only about 1 in 10 of those who sign up to a label make success on their first album. Then imagine how many of those need to be whittled down until you have your one King or Queen of the decade.

So the Indie market sure has a lack of related multi-millionaires but that does not mean that millions in income cannot be had. Most musicians though just earn an honest wage good enough to live on. They then make success or failure on their own music and marketing skills.
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Anonymous Coward, 2 Oct 2012 @ 11:02am

Actually, the whole new business model seems more inclined to kill "artist development and long term careers in a mad dash attempt to make money as quickly as possible." - except you replace money with "get youtube views" or "get hype" or whatever you want to measure it by.

With the noise floor rising (more "artists" producing more music that is mostly not what people appear to want), it's getting harder and harder for anyone to get profile for very long. It's all fast fad and meme bullshit.
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Lowestofthekeys (profile), 2 Oct 2012 @ 11:07am

Re:
It's funny that he is so anti Spotify and anti-Itunes because of the payouts, all the while ignoring the fact that the licensing fees from the labels strip away most of the revenues of both of those services.

His whole blog post directed at Emily White was ridiculous as well. It's the just the murmurings of someone who'd rather push for the consumer to change, then push for a system that benefits both the consumer and the artist.
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Atkray (profile), 2 Oct 2012 @ 11:31am

Re: Something I miss
That was a short-lived phenomena called FM radio. No commercials and the DJ would get so stoned he would just let the whole album side play, and not lose his job over it.

I'm testing out a free trial of satellite radio online to see how that works.
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Anonymous Coward, 2 Oct 2012 @ 11:49am

'While many from the old industry still look at the future and try to figure out how to hold it back, more and more are realizing that the right play is to move forwards, quickly.'

lots of truth here. the biggest problem still is those that have the most say, the most influence, are exerting it the most, particularly at those in congress, who are the most willing receivers of 'encouragement' and bull shit in increasing quantities. until they realise what needs to be done, reeducate and influence correctly the die-hards of the old legacy industries, the 'holding back' will win
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Anonymous Coward, 2 Oct 2012 @ 11:49am

Re: Tangent
I believe such a thing would be what's known as "karmic justice."
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John (profile), 2 Oct 2012 @ 12:11pm

So.......labels kill innovation but artists should sit back and accept it when labels merge?

Methinks this site is contradicting itself.

Or maybe the site just hates both.
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Ninja (profile), 2 Oct 2012 @ 12:13pm

Re: Something I miss
last.fm

It suggest artists based on your listening habits. Pretty useful.
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Anonymous Coward, 2 Oct 2012 @ 12:30pm

Damned if they do...
They wouldn't be able to make their ungodly profits even if they were to turn the clock back. This guy made his own record cutter using old sheets of plastic, even a cd or two. Youtube link

Better to bite the bullet and get it over with.
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jupiterkansas (profile), 2 Oct 2012 @ 12:33pm

Re:
It's more like instead of a million people listening to the same artist, you have 10,000 fans each listening to 100 artists. Instead of one person getting rich, a 100 people make a living.

There's a lot more room for more music, but it's much less likely someone will become a worldwide star. That's pretty much gone these days anyway without the help of television.

And the listener wins because they can choose what they like and not care whether it's popular or not - provided they're listeners who actually care enough about music to make a choice.
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Anonymous Coward, 2 Oct 2012 @ 1:04pm

yeah everyone pirated their music instead of paying so they lost money

now they're working on 6 strikes laws to try and regain that control, and hopefully profits :D
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Lowestofthekeys (profile), 2 Oct 2012 @ 1:10pm

Re:
A swing and a miss...
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Anonymous Coward, 2 Oct 2012 @ 2:40pm

Re:
Incidentally, how did 3 strikes work out for France? Waste of money for several years, the new government is considering reducing funding to it if not canning the whole thing altogether, and the one person that gets punished isn't even the bugger who downloaded the music tracks in the first place.

Yeah, if you're expecting strikes laws to help artists regain control and get profits, you're pretty badly mistaken.
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Anonymous, 2 Oct 2012 @ 3:36pm

GAGA'S GREATEST
The artist formerly known as Lady Gaga, now known as Lady Ganja, will soon be releasing a greatest HITS album. It will include the favorites
"Smoker Face"
"Bud Romance"
"Burn This Way"
"You and High"
"DrugGame"
"Telephone (My Dealer)"
and many more!
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Anonymous Coward, 2 Oct 2012 @ 6:15pm

Re: Re:
"And the listener wins because they can choose what they like and not care whether it's popular or not - provided they're listeners who actually care enough about music to make a choice."

Perhaps in the short run, the listener feels they win - and then they realize that they are losing their lingo-franca for social stuff, where they no longer have anything in common with anyone else musically in their area, and they are alone in their little music bubble.

Can you imagine for a minute going to a nightclub and not knowing any of the music, and for that matter, nobody in the room knowing it? Can you imagine concerts where only 5 people turn up in each town because they are the only ones who know the music? A world where listening to the radio might as well be listening to a foreign language?

Music is a social connection, a common language that let's us gather and be social. Taking that away gives internet people perhaps a warm cuddly feeling that fewer people will be AFK having a real world life, but in the end, it hurts the social world.
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Anonymous Coward, 2 Oct 2012 @ 7:17pm

Re: Sooner The Better
good lord... what jeff price doesn't know about the music business could fill a warehouse... it's like the entire INDIE/DIY/PUNK scene never happened in Jeff's twisted revisionist view of the the world... no wonder he got booted... he can't even get his history or facts straight (same guy who can't and doesn't understand how soundscan works).

figures... keep up the good (disinformation) work...
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Anonymous Coward, 2 Oct 2012 @ 7:44pm

Re: Re: Sooner The Better
Yeah, the only person worth listening to is David Lowery. That guy totally states things that only the facts support. /s

Seriously though, stfu. I'll put more stock in what Jeff Price says than some Anonymous Coward like yourself. Basically, when people like you show up to mock someone or dismiss them, it just gives more credence to what they say.
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Suzanne Lainson (profile), 2 Oct 2012 @ 8:45pm

The envelope isn't being pushed enough
There is another next step which most of the new music industry and the artists haven't yet grasped: The wall between artist and audience will come down. There won't be a difference. Everyone will be creative. Sure, there will be people who do it better than others, but as the technology allows more people to create for themselves, the idea of "fans" will transform.

Given world economic conditions and the fact that work itself is changing, and who has money and who doesn't have money is also changing, the idea that there will be a vast population of fans waiting to give their money to artists is likely to change, too.

The real music revolutionaries are people like Ge Wang at Smule.
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Anonymous Coward, 2 Oct 2012 @ 9:18pm

Re: Re:
Actually, 3 strikes was just starting to bear fruit when a change of government means that there is a change of policy. It's really too bad, the first cases are finally getting to court.

It's more a question of a new government looking to cut costs rather than an indication of the program's success, considering the first cycle isn't done yet.
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Anonymous Coward, 2 Oct 2012 @ 10:22pm

Re: Re: Re:
If - by copyright maximist estimates - 90% of all IP addresses harvested are guilty there's no reason for that many cases to not hit the courts, especially after a time span of several years. The one case that does hit the courts isn't even the right person.

If the government is looking to cut costs and that is one of the first initiatives mentioned... speaks volumes about its importance, I'd say.
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Anonymous Coward, 3 Oct 2012 @ 2:47am

Re: Re: Still Waitring
Just remember, you want to pucker before you kiss Mike's butt. If you do really well, you can replace Marcus as a writer, seems he is too busy working in the copyright world to write anymore!
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Tim Griffiths (profile), 3 Oct 2012 @ 3:40am

Re: Re: Sooner The Better
"music business"

"INDIE/DIY/PUNK scene"

These are not the same thing. I know a number of people heavily and actively involved in the UK punk/diy scene as both bands promoters and label owners and each and every one of them would say the same.

Those scenes where never about making money they where about a community supporting a given group of artist because they loved the music those artist produced. What's wonderful about the disruption in the music industry is that the new model, the new way of doing things, is more aligned with the ethos those scene where built on. More people are starting to be able to make more money with out compromising the predicables of those scenes.
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Anonymous Coward, 3 Oct 2012 @ 4:10am

Re: Re: Re: Sooner The Better
Sorry, but the AC above you is correct.

This Jeff Price guy sounds like he was in above his skis and got booted for good reason.

First, it�s far cheaper to record now than it ever has been before. In addition, the level of expertise needed to record has dropped considerably. With a laptop, some one-time purchases of software and some hours to learn how to use it, a home recording studio can be created for the cost of one day�s recording at a high-end studio.

This proves he's clueless.

Cheap digital recording technology has existed for decades.

And by a factor of millions, the most sought after and consumed music is still recorded by those with talent and expertise.

oh pesky facts...
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Anonymous Coward, 3 Oct 2012 @ 4:13am

Re: Re: Still Waitring
Outliers aren't business models.

Sorry.
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Tim Griffiths (profile), 3 Oct 2012 @ 4:14am

Re: Still Waitring
Most artist on labels fail to make back their advance and those artist make up a tiny percentage of people who make music. So the chances of making a million in the old system is tiny only a very few very lucky artist where ever able to do that in the first place.

Under the new system we don't really know if millions can be made and I don't personally remember any one claiming that you would. Either way we've are going to find that out, we know for a fact new systems for content, including music, can raise backing of over 1 million and that's a good sign that that level of money maybe able to be made for the right, lucky, people.

What important about all this is that under the old system it was near imposable to make a living. What people forget is that even if you made it to a label you most likely ended up in debt. With out the labels help you'd be lucky to be able to make making and playing your own music a long term job.

Under the new system more people are making more money than ever while doing so. It's comparable to the rise of the middle class, we are past the point where you either end up rich or poor from making music and just like the middle class it's the best result for most people.
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Anonymous Coward, 3 Oct 2012 @ 4:15am

Re:
Don't forget puppies. Labels kill innovation and puppies.

Pretty sure they're responsible for world hunger too.
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Anonymous Coward, 3 Oct 2012 @ 4:19am

Re: Re: Re: Re:
Try reading something besides TD sometime. The Euro is screwed and Europe is entering recession again. Austerity measures are becoming the norm there.

And the bringing of someone to court isn't the issue. The issue is deterrence, just like most laws.

Feel free to make the argument that laws do not have any effect on deterrence.

Hint: Posting examples of people that do break the law isn't evidence that laws do not have an effect on deterrence.
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Ninja (profile), 3 Oct 2012 @ 5:07am

Re: Re: Re: Still Waitring
Not interested in writing to techdirt. Not my thing. Care to address the point instead of attacking me? Oh, you can't =D
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Ninja (profile), 3 Oct 2012 @ 5:08am

Re: Re: Re: Still Waitring
Interesting, most major artists could be considered outliers if you take into account the amount of artists that failed to get there.

Thanks for playing ;)
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Tim Griffiths (profile), 3 Oct 2012 @ 5:30am

Re: Something I miss
If there is a demand for that and innovation is not being strangled by the legacy players it will be filled. I personally see no reason why streaming services couldn't have a front end internet radio type of thing attached where a DJ uses the songs available on the service and you'd be able to do things like pause your stream and jump to an artists page if you happen to hear something you like and want to listen to more.

I think the only reason this isn't already happening is likely to be that streaming licensing is different to radio licensing and internet radio licensing is current being screwed over by the legacy industry so it can't compete with radio.

There should be nothing inherent in "active" services that prevent what you are looking for being done. It just can't happen while the legacy industry is stacking the deck against it.
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jupiterkansas (profile), 3 Oct 2012 @ 7:55am

Re: Re: Re:
For starters, music is personal. It's something I enjoy by myself. If nobody else listens to it, what do I care? I have tons of music that, to my knowledge, I'm the only person on earth that listens to it. I went to just such a concert you mention recently and was surprised to see a hundred other people there that knew the same songs I knew. Yes, it was the warm, cuddly feeling of socializing.

Even better, we could all watch a few feet form the artist, and actually see their faces and watch them play their instruments. It was far more entertaining than some giant arena show where there are 10,000 people and the artist is just a speck on stage you can only see because of the big TV screens. If that's what entertains you, fine, but it's not for me.

The social world you're talking about is one where a single artist is regarded as better than all the rest, and one style of music dominates all others. It's the album rock world of the 70s. I like a social world where multiple styles of music flourish and fans have diverse and eclectic interests, and many artists have a chance to be recognized instead of a select few.

But the real question is who creates the social connection you propose? In the past, it was created by big media companies through radio play and television. It was easier (and more profitable) for them to promote a single artists to a massive audience. They created gods at one time, but where are the gods today?

Today he social connection created by the fans themselves, and the artists. I don't need television or radio to tell me what music to like. So yes, I feel the listener wins, and the social world is more social than ever.
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jupiterkansas (profile), 3 Oct 2012 @ 8:00am

Re: Re: Re:
Can you imagine for a minute going to a nightclub and not knowing any of the music, and for that matter, nobody in the room knowing it? Can you imagine concerts where only 5 people turn up in each town because they are the only ones who know the music? A world where listening to the radio might as well be listening to a foreign language?

I might add that this world you describe is one I've been living in for 20 years. It's not a bad world at all. Oh, and the last time I listened to the radio: 20 years ago.
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Anonymous Coward, 3 Oct 2012 @ 8:48am

Re: Re: Sooner The Better
And right on cue, googlypants! Still trying to market off your own spit for shoeshine, are you?
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Anonymous Coward, 3 Oct 2012 @ 8:50am

Re: Re: Re: Re: Re:
The frequent argument that is made about copyright infringement deterrence is that if people didn't have access to media via copyright infringement, they would buy said media. Ergo the deterrence laws are needed.

France has not seen an increase in media sales after HADOPI's implementation.
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Suzanne Lainson (profile), 3 Oct 2012 @ 10:59am

Re: Re: Still Waitring
What important about all this is that under the old system it was near imposable to make a living. What people forget is that even if you made it to a label you most likely ended up in debt. With out the labels help you'd be lucky to be able to make making and playing your own music a long term job.

Most people making a living in music were never part of the old system. They had music jobs that paid a decent living or they were DIY all along. And being DIY during the cassette and CD days was actually very good because it didn't cost you a lot to make those and yet you could sell them for full retail at your shows and keep all of that money. Now that people aren't buy much recorded music (I don't mean piracy, I mean they are getting free legal music or they are buying a few tracks rather than an album), those CD/cassette sales have largely disappeared for DIY artists and that brought in a chunk of money. Successful unsigned artists were doing between 3000 and 10,000 plus sales per year. At $15 a CD, that was $45,000 to $150,000 they could keep entirely for themselves. It's been hard to find substitutes for that income.

Also many clubs that used to hire live musicians have switched to DJs. Same with weddings. And schools that have used music teachers have cut back on that.

So a lot of old music streams for unsigned artists have dried up.
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jupiterkansas (profile), 4 Oct 2012 @ 7:37am

Re: Re: Re:
It doesn't hurt the social world. It changes the social world.
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