It occurred to me that we’re probably seeing the last days of large music labels, even if they do stop resisting the Internet and extend their lifespan a bit.  Eventually, they probably won’t be needed—they are middle-men, and by its nature the Internet allows people to bypass middlemen.

If you think about what a group needs in order to be successful, most groups are able to produce a first recording on their own, and it really comes down to needing one thing to get started which only record labels can provide:  marketing.  The marketing comes in the form of radio airtime and music distribution as CD’s (and now online music stores).  Just about everyone knows that groups don’t make much money off of CD sales, they make the majority of it off of merchandise and ticket sales.  So in actuality the record label only serves to attract people to the group so that people can their stuff.

Most bands are able to record something on their own dime (and for those who aren’t maybe somebody could start a music capital investment venture…).  But promotion and marketing are going to evolve; soon I don’t think they’ll resemble anything that we have today.  Whereas today promotion is done business-to-consumer, record labels using mass marketing to reach mass audiences, I think the future holds a lot more consumer-to-consumer marketing, more closely resembling what we think of as pyramid marketing but with the performers at the top of the pyramid.

One of my friends was handing out CD’s for a band that his friend was a part of, which got me thinking.  If people are willing to hand out CD’s for bands because they like them, why not capitalize on that and turn it into an associate program?  It would be cheaper and easier to just hand out cards with some information including a URL to get free MP3 downloads from the Web site.  The Web site could offer the rest of the tracks as a paid download along with selling merchandise and tickets—the cash cow.  Just put a unique identifier in the URL so you can track it back to the person who gave the card out, and give them a cut of any revenue that comes in as a result of their evangelism.  All the benefit of record label marketing without the gatekeepers and middlemen.

And then if you really wanted to get fancy with it, make the program multi-tiered.  Let people sign up their friends who dig the music and then give them a small percentage of whatever their friends bring in as well.  You’ve just given them an incentive to tell people about the group as well as try to recruit other people to spread the word as well.  Amway, meet Atlantic Records.

In any case it’s inevitable that some kind of shakeup is going to happen in the music industry, it’ll be interesting to see what music promotion looks like a few years from now.