Disclosure 1 – my firm consults and does music marketing for, among many other client types, major recording artists, media companies, and live concert producers, and occasionally a label.

Disclosure 2 – I am also the partner in a record label that launched bands by embracing social media, file sharing, the internet and the like, and some of the bands have happily made a living off of it, even as most people have never heard of them.

I think there are some great comments here. I’d like to add three other areas for consideration that I haven’t seen mentioned:

1) When we talk about the internet making things free, and the law and the internet not being aligned, and everything going to zero, it’s very important we remember that this is only the case with CONSUMER purchase habits. The legal framework and market for B2B licensing is still completely entact. Producers still pay music licensing. Bands still make a ton off of ads, licensing within TV shows and movies, video games, etc. There is a TON of money to be made here still. When we talk about pricing going to zero, it’s important to remember it hasn’t for businesses. Businesses have money and, thus, are suable, and, thus, follow the law even if the internet made it physically easy not to.

2) You talk a lot about a lack of tools, and I think this is interesting. I don’t want to get to metaphysical, but what is a tool? It’s an implement that helps you do a job. We all have a lot of faith in the web, and I think there’s an implicit belief amongst the more techno-utopian of us that there can exist a so-called “tool” that magically… does.. what? Gets your band known, licensed, booked, and with a fan base? Let’s look at this with a similar type of entity that have “cracked” online marketing, at least more than bands: brands. The most savvy marketing brands out there (Apple, Zappos) don’t rely on some magic tool to do their marketing. They rely on large numbers of very smart people doing very difficult things to accomplish their goals. They have “tools” in the sense that they have email and excel and internet connections and iphones and photoshop and ruby on rails, but they don’t have tools in the sense that they rely on a magic box that makes their brand well-loved and famous. And indeed, the “tools” that exist out there for this – things like Appsavvy or Get Satisfaction or Salesforce – are still only part of the solution. Smart people still need to do a lot of hard work to get things done.

THIS is where music has broken down. The money is on the licensing, live and mech sides, but the marketing muscle and money came from the record labels, who traditionally didn’t get the licensing, live and merch money. (This is a bit more complex when it comes to publishing, but the premise still stands).

There is, however, no reason to think that artists couldn’t work like brands – invest substantial sums of money on smart people who view their entire ecosystem and make incremental progress on maximizing revenue through increased awareness. IE: Brand advertising, PR, etc. And there’s no theoretical reason why a partner investor couldn’t see the potential value in an artist, and strike a deal with the artist to take a cut of ALL the revenue, and spend money maximizing awareness to increase total revenue. This is what LiveNation is doing, of course, but I find it interesting no one’s doing it for the smaller bands. Why aren’t there more artist funds, like there is in the fine art world? Why aren’t there band VCs? Why on earth do we expect ten nerds in silicon valley to solve all the problems?