From TechCrunch: http://www.techcrunch.com/2008/03/22/these-crazy-musicians-still-think-they-should-get-paid-for-recorded-music/

So we find our selves at an interesting point in history.  It’s one of those inflection points that many MBA students will be talking about in their cohort classes on management theory a decade from now.  The last decade has seen a tremendous amount of change in the way that people consume music, but one thing that has not changed is that the artists seem to be getting the short end of the stick.  The economics have shifted from the record labels, as Billy Bragg would have you believe, to the social networking sites, whose fortunes are made on the backs of artists. 

In searching for quotable data about the economics of the music business, I came across this post at BubbleGeneration.  An interesting pull out was this analysis:

The major record labels assume market risk in exchange for value. They take on the risk of assuming search, development, and distribution costs, in exchange for uncertain profits. 

That pretty much sums it up.  The problem with Arrington’s post, and quite frankly with some of the other cheerleaders out there, is that they fail to get to the core of the problem.  What business are the artists in?  Fred says that he’s “tired of the arguments, no matter who is making them. It’s time to help these artists get paid.”  Well, yes and no.  I don’t know of anyone who cares how I get paid.  It’s on me to find gainful employment, or in some way sell the fruits of my labor.  The hard part for the artists is that, to date, the economics of the business in which they chose to participate have not been very favorable to them.  I have enough issues with the tax man coming for my paycheck, but artists have to pay managers, labels, booking agents, roadies, backup bands (if needed), etc.  There are so many hands out that it belies logic that anyone would want to get into recorded music in the first place.

With regard to the labels, the business model has always been that they take on the risk of an unknown band and then promote them to the radio stations, who in turn build the listenership for the artist, and hopefully sell some albums.  Artists were unable to do this by themselves when this structure was put into place.  Back to Fred’s point about helping the artists get paid - I think the Internet and the entrepreneurs building platforms around social sharing of preferences have done plenty to help the artists get paid.  It’s time for the artists to change their thinking about the value chain of their business.

As with any shift in business models, there are going to those who are resistant to change.  Those who have seen benefit from the system, or those hopelessly trapped in it with no ability to do for themselves, having signed over their livelihood to a label.  This all reminds me of my own business school memory when we were examining the change over from rail to trucking in American industrial development.  The question was asked of one rail executive (and I am paraphrasing) “are you in the trains business or in the transportation business?”  This simple shift in thinking causes a rapid deterioration in the mental blocks we have in place that cause us to not see the bigger picture.  Artists need to start being their own marketers, labels, and promoters.  They now have the ability to reach millions of potential listeners, distribute their music in a direct to consumer model, and own the relationship with their listeners.  This is an unbelievable shift in the economics of the music business, and only those who are willing to step beyond their mental barriers will see this opportunity.  Just as the technology is now available to listeners to reduce their risk associated with music discovery, artists can reduce the risk associated with work creation, dissemination and customer acquisition.

The trouble with customers isn’t that they hate artists.  Far from it.  They hate the record industry, and their insistence that we pay $15-20 for a CD full of music we may not like.  That we pay $7 for a CD single, with one A side and one B side track.  That the artists get completely screwed by their contracts, like, for instance, the great and amazing Tribe Called Quest members who each made a reported sum of $45K from their life changing album Midnight Marauders (according to an MTV special analyzing the record industry).  Again, with all the hands out from those involved in the value chain, there was very little leftover for what was a top selling album of its day.

So where does this leave us?  Well, Arrington shouldn’t be blasting Billy Bragg for what is obviously sour grapes.  I don’t hear anyone shedding tears for Tim Berners-Lee everytime a dot com gets bought for huge sums.  Certainly no tears for Al Gore, since, you know, he invented the Internet.  The artists now find themselves at a unique point in time where they have incredible levels of access to the promotion channel, direct access to their customers, and platforms which allow for agent-less free promotion and distribution.  The people who should be working on getting the artists paid is the artists.  They have to shift their thinking from believing they are in the music business, and start thinking they are in the entertainment business.  Dave Matthews gets this, understanding how to use his customer base to draw in new listeners, constantly being on the road doing shows, and creating an entertainment consumable for which people are willing to pay.  Trent Reznor also gets this, and has shown that fans do buy your goods when they feel like they are getting a deal.  The recorded music business is a sprint, where popularity is driven to dizzying heights in a few short months, and the top 5% take the lion share of the money.  The entertainment business is a marathon, where customers are acquired over time, but a sustainable, livable business is created.

Remember, people don’t hate artists.  Far from it.  They love them, and want to support them.  They just want the risk of discovering music reduced, and most (from my own personal sampling) want the artists to get the money, not the labels, and heaven forbid, the RIAA.  It’s time to stop having the discussion about how the Internet is killing the music business.  That train has left the station.  It’s time to start having the discussion about how the Internet has ushered in the era of the entertainment business, where artists control their own destiny and their brand, have access to their customers, and can publish in ways (audio, video, live, etc) that were inconceivable even a few years ago.  It’s time for the artists to cowboy up and start getting the religion of tech, and pray at the altar of http.  Artists are no longer artists; they are CEOs of their own eponymous business.