Some of you might remember something called "Napster" from about 10 years ago. If you do, you might recall that it was a phenomenon that swept the "Internets", attracting millions of users with the simple lure of easily sharing files - mainly music mp3s - which was declared to be illegal under U.S. law. (And, by extension, of course, that meant that NO ONE was allowed to do it.)
Exhibiting the sort of wisdom that any radical change brings out from an established "industry", the Recording Industry Association of America spent millions of dollars on a multi-year legal campaign to take the moral high ground by prosecuting debt-ridden college students and 12-year-old girls for "piracy", and forced the previously successful Napster company to become an emasculated and enslaved shadow of its former self. Apparently, they believed that doing so would somehow "recover" the imaginary 2 billion dollars per year they claimed was being stolen from them by those of us who were downloading stuff for free that we would have never in a million years have paid money for.
But as many of us said then, and still believe now, Napster signaled the end of the old ways of giving the business to musicians. Many established artists are perfectly happy to stay with a label, and operate that way; and as long as the system works in their favor, there's no reason for them to change. Change is inevitable, however, and the last two years especially have seen some important results.
Among my favorite examples of the progress of this change, Dream Theater,
have been extremely successful with using the internet to drive their business. Drummer Mike Portnoy has channeled his hyper-active energy into active participation on the band's fan forums, and the band has taken a proactive approach to providing official "bootlegs" of their concerts in a way that a label couldn't afford to do. Their personal relationship with their avid fans worldwide has propelled their success despite flaccid support from radio airplay, or videos. In twenty years, and more than a dozen studio and live albums, they've only managed one "chart hit" - a fact that they've humorously acknowledged by naming their 2-disc compilation "Dream Theater's Greatest Hit (and 21 other pretty cool songs)".
(Prince is another artist who has embraced the net for getting his stuff out to his fans.)
The most significant change, though, has been the creation and use of the Creative Commons License. I used to tell people about the CCL, and how artists were now able to release their own work on the Internet for free, and they sneered at me. "Who would do that? How do you make any money at it? That will never work!"
Exhibit A: Escape Pod, a science fiction short story podcast edited by Steve Eley, who started out with a simple idea: offer writers $100 dollars* for stories, which he would read and post as a weekly mp3 on his podcast feed. The audience was asked for whatever donations they felt appropriate, which Steve uses to pay the authors. After only two years, as he explained in his third Escape Pod Metacast, Escape Pod is the 2 market for short science fiction stories.
Just in case you don't understand what I'm saying: Escape Pod, a free weekly podcast supported only by its listeners, has surpassed all but one traditional science-fiction short story magazine, as well as the other similar podcasts that have sprung up in the last couple of years.
Exhibit B: Jonathan Coulton, who quit his software development job and began posting his music free on his website. Again, he asked for donations, and he offers his CDs for sale, but you can have any mp3 you like for free. Between the donations and concerts (which he books when enough fans demand him via Eventful.com), he is making more than he did as a software developer.
(UPDATE: In a May 2011 "Planet Money" story on NPR, JoCo admitted his song sales had topped one million dollars.)
Exhibit C: Last.fm, the "social music revolution", has begun paying royalties to the artists that make their songs available via the Last.fm site. Some artists go as far as letting you download, but most are only comfortable allowing you to stream their songs. But go to the site, look up your favorite artist, and look at the number of plays they have; even the miniscule royalty rate (a fraction of a cent per play via Last.fm) can quickly add up when spread across the growing, and already global, membership boasted by the service.
Clearly, there is a way to go, yet; TV is starting to catch up with the YouTube model, though (NBC.com does a decent job of hosting their content for free with minimal ads), and the Daily Show has released all of their content via their website.
It's only a matter of time.
*Edit: Escape Pod initially offered $25 for stories, but that was increased to $50 and later to $100 thanks to the generosity of the listeners.