If you stripped the music industry down to its barest elements, and left only the things that are present without technology, then you would have an artist singing to an audience.

This is the key to understanding just what technology has helped do to music, to an artist’s path through music, and to fans’ experience with music. Technology has been accelerating at a rapid pace for some time now, transforming and reengineering business process of music, specifically in the ways that artists and fans connect.

When we talk about technology’s transformation of the music industry, because of an “evolution” in music, we have to be careful to realize that what draws people to love music and artists will not change: how the music and artist make people feel. It is the space where the fan discovers the artist, makes an association with a memory or experience, and solidifies that artist’s message as joy, sorrow, pleasure, or pain. That powerful relationship is and has always been the sustenance of the music industry.

However, the major aspect of music, which still holds so many questions, is how technology has changed our willingness to pay for music. To be fair, since the dawn of music, the technology in the music industry has been changing. From the electric guitar to the CD and DVD, the industry has, for the most part, embraced the evolution. However, the wave of digital is different.

The elephant in the room came in large style with the advent of Napster, a free file-sharing system that allowed people to circumvent the purchase of music. A generation became accustomed to free music. What this actually signaled to the music industry is that the business model you people have – the one where you make your money off product sales…yeah that one-it no longer can work the way it used to. This crushing blow meant that the entire justification of a record label (many suggest that businesses exist to make profit), would have to adopt to a new way of making money to deliver music to the fan.

Also with the emergence of digital media, other questions arose. A cloud spread over the industry as advances in technology pierced the once impenetrable shroud major labels had claimed; for labels had been more than just enterprises that made money off the product of music. They worked within the continuum of a myriad of players. Their livelihood depended on having leverage and negotiating power over the artist as well as the fan. Their proper function was as that entity that you cannot live with and cannot live out, because the artist depended on them to introduce and distribute their message to their audience. They needed labels to both create their product, and most importantly, market and distribute it. But, this symbiotic relationship existed on the prospect of sharing in the rights of the artists’ creation. Unfortunately, with the product of music decreasing in value through online platforms like Napster, the old business model that provided for the livelihoods of labels has been disintegrating, and has forced many labels to look in fresh places for the revenues they used to enjoy.

And yet, the middle man component of the label is not complete without the classification of the fan: the life force of everything the artist wants to connect with. After all, at least in the past, a connection with the fan-a widespread connection- has always meant more revenue, more exposure, more fame, and more people listening….to a voice, that many of us believe in an almost common sense kind of way, is the reason why an artist exists.

The role of the fan has changed as technology has changed. The fan has always been dictated to. Then it is up to the fans to decide what they like after they have been given options based upon what another person thinks is good for them. Genius A&Rs like Rick “The Ear” Rubin have amazing and consistent abilities to choose and mold superstars, and these folks have been at the center of the music industry. Nevertheless, with the digital revolution there is much more available.

There are those artists, locally popular ones, which in the old system had been among the disillusioned and disenfranchised because they were not able to sell enough records to be placed under major labels’ radar. Also, among indie labels their options were limited in choice and consistency.

But the digital revolution has forcefully flattened the industry in a manner that is still evolving. The Rick Rubins will still have their place as indispensable gurus to labels, but artists are increasingly able to garner attention and build a livelihood based on their own means. Myspace and Youtube are rich with examples of independent artists that are able to become famous solely by their own effort. In addition, fans have access to music like never before.

This essential piece: artist independence, is the arch-enemy of many traditional labels because artist independence has always meant a battle over the rights of the artists helps to create. But labels have no choice. With a diminishing product, they will have to align themselves closer to artists’ longevity and closer to cultivating their artists’ connection with their fan base-truly their most powerful and sustainable revenue stream.

All of that said, labels are still searching for a heart. The more dynamic and forward thinking labels – the ones that will carve a space in the future- are searching for a business model that can justify a new relationship with artists and fans.

From this, the ugly question arises again: How do we make money? And the answer is mind-numbingly fleeting. Labels have been dying because they have seen the recent shift in technology in the same way as previous shifts in technology. But revenue is not easily convertible. The focus has shifted to “how can we make money off the other things that artists do?” This is namely in the fields of merchandising, sponsorships, touring, and licensing.

A temporary solution within the industry has been 360 degree contracts. Ironically, one of the major problems with 360 degree contracts is that they don’t take into account the most beautiful and compelling aspects of our digital revolution. Namely, that it is becoming easier for artists and fans to find one another – online as well as offline. This forces 360 degree contracts to be a temporary solution because they are an attempt of many labels to hold onto their leverage within the industry rather than acknowledging a new system, based more squarely on newfound independence of artists and fans.

This is a step forward in the paradigm, but not a solution. The crisis within the record industry has been based on shifting revenue streams as a result of music, artist, and fan mobility. This returns us to a more democratic future of the music industry, anchored in a loss of leverage, and what should be a return to what the industry is and will always be about – how a song or an artist makes you feel.

by Marcus Ellison