David's Got It Right
David Hyman's been around online music for about as long as anyone I know. He's the founder and CEO of Mog, the blogging service for music lovers. He has a post about the future of music up on his mog that I completely agree with. Here's the meat of the post in case you don't want to click thru and read the whole thing.
Here's what the labels need to do: drop that penny per track per stream rate to about 10% of what it is today (that's right - 1/10 of a penny per stream). When that happens, the labels are meeting the market and giving away music becomes lucrative; everybody and their brother starts doing it. The labels turn all of online music consumption into a revenue stream - every site with all-you-can-eat, on-demand music. Thousands of sites innovate and create new value around how to discover and consume music. By my estimate, that's a $250 million per year market for online ad spending alone.
Next, ensure that every streaming track links to the opportunity to download the track in mp3 (with Amazon or whomever) and the labels have created the ultimate promotional machine for mp3 purchasing (for the next 10 years, people will still need to download for their portables and their car). Then slap on a tempting upsell: offer users an ad-free, higher-bitrate subscription service for a reasonable fee (say $5 per month). Suddenly the labels have a shot at staying alive.
I'll go one step further and suggest that while they are at it, they agree on an open api standard that allows connected devices (like sonos and squeezebox) in our homes to connect to these services. That's a big opportunity just waiting to happen.