Music's Marginal Reinvention: There's More Than Just Streaming

04/06/2015 10:47 am ET | Updated Jun 06, 2015

From the relentless focus on the music industry's latest streaming model, one might think Taylor Swift and streaming services represent the entire future of the music business. Last week, as Jay Z announced plans and major artist support for his new Tidal streaming service, many seemed to view it all through the same lens.

Streaming services and "freemium" models are still important to understanding the future of the recorded music business. But they're actually not such interesting topics anymore. Too much focus on streaming misses the point: there's actually a lot more to music's future.

These days, the most interesting developments in the music industry are not happening in the offices of the major labels or major music services like Spotify or Pandora.

The music industry 's latest reinvention is happening on the margins of the business, amongst parties who aren't so happy with the new equilibrium. These changes are happening on multiple fronts, above and below the center of the music industry's traditional powers.

First: since there are many alternatives for artists to bring their music to market, newly empowered managers no longer actually need labels to distribute their digital music. For a small fee, SoundCloud or TuneCore can launch an artist in hundreds of digital retailers. I recently worked with a major artist who was undecided about making a label commitment. We delivered a single to an audience of millions. Our digital delivery cost: the grand sum of $10. The major artists lining up behind Tidal may make headlines as the promote the service, but what is more threatening is the notion that they might someday pull back their content in unison from services like Spotify--the idea of a "windowing strategy" could just be a first step in that direction.

Second: Artist apps are now potentially serious threats to the ecosystem, too. Once an app aggregates enough of an artist's audience, the ability to generate advertising revenue becomes quite real. That revenue, unchained from an artist's recording contract, can be a beautiful, incremental benefit for an artist--even more incentive for an artist to support that app. There are multiple of these news apps in the American and global markets, all competing for a share of artist's audience, and most of these parties are targeting artists, not labels.

Third: Direct to consumer sales were once an obscure area of the record business. Today, "D2C" is no longer a backwater, and it's likely driving Jay Z's interest in Tidal. A major artist can sell their own music and add in merchandise and tickets, too. Instead of stewing as Spotify and Deezer grow, artists can sell and talk directly to fans, and even build a base of consumer data. Imagine what an enterprising major artist manager can do now with full set of rights and a committed artist. There's also a supporting set of music data services, offering everything from playlist creation to some of the deepest "skunk works" on consumer music preferences one could imagine.

Fourth: Music video is reinventing too. While Vevo, the industry backed video network, has generally been a positive force for the music video business, the growth of multi-channel video networks are another window for artists to build a fan base, get exposure, and perhaps even get a taste of advertising revenue, too. Zefr, Culture Machine, and MiTu may not be familiar names, but they're helping to build an ad-supported music video business in a way that is more likely to help independent artists than MTV ever did.

Finally, most roads lead back to the idea of brands underwriting music. In developed markets, Coca Cola and Red Bull actually fancy themselves as music lifestyle purveyors and destinations. (Forget about those sodas.) Emerging markets see brands as a great solution to bring forth music campaigns those consumers would otherwise not pay for (or even afford). Even some major labels see themselves as ad agencies. One actually has a creative agency in house, while another builds an advertising technology business, hoping it plants seeds for the day when music is purely advertising supported.

It's not clear where all this plays out, but meeting many across the music industry this past year, I saw a clear picture of an industry trying to reinvent itself. And while labels still have an important role, the new equilibrium brings a healthy competitive balance to the market. Even a major needs to justify what they can do to support an artist. and all of these new developments offer the promise of reinvention and growth.