The Fall of the Record Business: What Next?

Theory 1: Ad-Supported Music
Yahoo! Music General Manager Ian Rogers says all music will be free - paid for by ads - and any song by any artist will be accessible from anywhere in the world.

"I can imagine a future where you just consume a hell of a lot of music - just hit 'play' on any player, and hear music. There's an ad experience there, and we'll pay the labels a percentage of that ad revenue. All devices will be connected to a network and we can find anything we want and hit 'play' without connecting our device to our computer and dragging a physical file over. People are going to have the expectation that they can get to anything whenever they want to."

Theory 2: Peer-to-Peer Goes Legit
Eric Garland, CEO of digital-music research firm Big Champagne, says people will pay a monthly surcharge on their cable bill to download an unlimited supply of tunes.

"Tens of billions of songs are downloaded for free by people all over the world, representing a huge market - not in changing their behavior, but in creating businesses around that fact. People that provide access to networks are the logical place for payments to be administered: Today you pay your cable company, not only for bits and bites, but for services like HBO or a tier of basic cable. It's in everyone's interest to administer payment there, with royalty payments made from pools of money collected based on stat rates or voluntary rates. You'll have Time Warners and Comcasts and Verizons working with content companies to convert these marketplaces without trying to change customer behavior."

Theory 3: Endless Access Points for Music
David Pakman, President and CEO of the indie-minded download site eMusic, says the more outlets there are to buy music, the fewer people will turn to piracy.

"The future of the music industry is bright. The old way, you'd buy a CD because you heard it on the radio. Now we have 20 different ways to go out and sample new music, whether it's blogs, downloads, ring tones, full-length mobile downloads, Internet radio, personalized subscription radio, or on-demand on your cable box. Those will continue to proliferate. It's important to offer music for sale everywhere. Selling more music is the way to monetize it and compete with piracy."

Theory 4: Labels Change Their Stripes
Rob Glaser, the head of Real Networks and Rhapsody, predicts that labels will operate more as managers, earning most of their profits from licensing, touring, and merchandise.

"The notion of a company that is only in the business of selling recorded music is an artifact of the physical world. In the next year or two, as physical growth continues to lag, the labels' pain will just get so great, they'll move to a more rational approach: The smarter way for music companies to work as venture capitalists, where they help to support bands through recording contracts, tour support, licensing, helping them artistically, essentially as business partners. If the artists succeed, the labels succeed. In a digital world that's the only way to align the interest between the label and the artists and it's been surprising to me how slowly the industry has been to embrace it."

Theory 5: Consumers Become Retailers
Terry McBride, founder and CEO of Nettwerk Music Group, says social networking will be integrated with commerce.

"We'll be looking at a space where the consumer is the retailer. Within a text message, an email or an IM, I can say, 'Listen to the new Avril single,' you click on her name, you hear it, you like it, you hit pound-four, and you instantly bought it, but you bought it from me. And maybe it's for twenty-five cents, and maybe five of that twenty-five cents goes in my PayPal account, the rest of it goes through a payment system to the copyright holders. You've got your price point down to where it's not worth the effort of going online to find it, and you really tap into the social nature of how social groups work."

>> Read Brian Hiatt and Evan Serpick's special report on the decline of the music business.