The Internet was supposed to be the great leveler for aspiring musicians. Demos would be a click away from being heard by anyone in the wired world. Exposure. Opportunity. Fans in different time zones.
That was pretty much what MP3.com had going for it way back when. Its population of signed and mostly unsigned artists topped the 250,000 mark, and there were more than a million songs out there for the taking.
Then MP3.com made one crucial mistake. It got greedy. It was already flush with IPO cash, so it had no problem spending liberally to attract and retain popular online acts. It was even paying artists based on the number of downloads that they attracted. Yes, back then, eardrums were just as good as eyeballs when it came to the metrics of success.
The greed came in the form of a gutsy move that CEO Michael Robertson championed called Beam-It. MP3.com created a virtual music locker that freed music fans from carrying stacks of their favorite CDs around to play through headphones on their personal computers. (This was the pre-iPod era.)
Music fans simply went to MP3.com, registered, got their user names and passwords and began inserting commercial CDs they had purchased legally. An MP3.com server recognized the CDs and tagged them as part of the users' virtual music lockers, accessible on any computer browser with their user names and passwords.
MP3.com was way ahead of its time with such an ambitious strategy in digital music. Unfortunately, it was also of questionable legality, because fans were not listening to the CDs they had purchased, but rather to copies of those CDs residing on an MP3.com server. It may seem like a minor distinction, but the five major record labels didn't think so -- and they came down hard on MP3.com over licensing issues.
The settlements proved steep, and as MP3.com's cash hoard began whittling away, it accepted a buyout offer from Vivendi's Universal Music Group.
MP3.com was never the same after that point. Features were stripped. Universal's own signed artists were featured prominently. By the time the MP3.com domain was sold to CNET
The new names in digital music are familiar, but they specialize in commercial music. Everyone knows Apple Computer
Yes, there are sites out there that specialize in broadcasting the music of the typically unheard, but they are often fledgling operations with limited financial resources. Places like Ampcast, Soundclick, and IUMA are there to stream the unsigned, but it's certainly a more thinly fragmented niche than when MP3.com owned the indie music world.
GarageBand.com offers a unique twist on the traditional online music distributor by having artists review tracks before accepting their submissions. As an incentive for vetted quality, higher-rated tracks move up the chart and are privy to an even wider base of reviewers. GarageBand claims that 13 artists who started on the site have moved on to sign major label deals.
Cool? Perhaps. Yet there's a reason why there isn't a single worthy investing angle when it comes to buying into the trend toward showcasing the unheard. No one is doing it right.
The broadband migration continues. Bandwidth and servers get perpetually cheaper, yet the market seems to think that the only money to be made in digital music is in pitching popular tracks for a buck or less, or coming up with some portable aural smorgasbord solution of commercial tunes. In a word, strategy is primitive.
That's why I believe that, years from now, the major labels won't be the same batch of old-school vinyl pushers you see today. As ludicrous as it may seem, I think that the real power brokers in the music industry will be Google
Oh, they don't even know it yet. It may be years before they even come around to connecting the dots, but they will connect those dots. That's because those three companies are the ones leading the way in localized search.
The local applications these days are pretty vanilla. Commercial directories, intricate mapping features, and the ability of local advertisers to obtain cheap yet perfectly targeted text-based advertising cover most of the bases. Drumming up support for local garage bands seems unfathomable.
But think about it. CD sales have been sluggish ever since peaking five years ago. Internet and satellite radio have broadened musical horizons with niche programming to the point where conventional radio and music videos aren't the same hooking grounds they used to be. We are gradually moving away from the universally accepted rock star. Fame will no longer be spooned out in 15-minute increments. It will be dispensed in regional doses.
Yes, the local music scene will be the place to be in the future. Instead of hundreds of musical artists selling millions of CDs, you will have millions of bands selling hundreds of CDs. Record labels in their present form won't serve much of a purpose in a "bunt single" scenario like that. Google? Yahoo!? Microsoft? They will be the ones wielding the promotional weaponry.
The division may be by niche, but I think the more logical distribution of attention will be local. Area bands are the ones that are accessible. The three portal heavies will be fine either way, really. The future of music doesn't belong to the archaic distribution channels that have been crumbling reluctantly.
That system is based on a national net with ever-widening holes. It won't last. Yes, XM Satellite Radio
Still not sure? Upset that my scenario will dilute your listening experience by limiting what you are exposed to? Wake up, bud. Don't be naive. That's how it is now. As an artist, are you concerned that pop star dreams won't end in million-dollar contracts and fancy cars? Dream on, pal. Given the choice, I think that most musical artists wouldn't mind having to work that day job if it translated into a future of steady gigs with familiar crowds and never having to pawn your dusty gear.
So, which of the major portals will lead the way? Yahoo! and Microsoft have already joined companies like Apple in selling digital downloads of the established artists. Then again, maybe that's why I'm leaning toward Google. Sure, its "music" subdomain isn't even active, but no company has grasped the power of viral marketing at the local level quite as deliciously as Google.
Google rocks? In time, that may grow to have a completely different meaning.
Love music? Later this month, Rick will cover the state of the digital music industry and its biggest active players in his Early Adopter Roundup column, exclusively for Motley Fool Rule Breakers newsletter subscribers. Yes, even a 30-day risk-free trial will hold you over until the next issue is out, so give it a shot .
Longtime Fool contributor Rick Munarriz does not own shares in any of the companies mentioned in this story, but he knows the music industry fairly well. His band Paris By Air was once signed to Sony's Columbia Records label, and he wrote a regular artist promotion article for the original MP3.com site. The Fool has an ironclad disclosure policy. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.