Sometimes it really does take ages for people to understand things have changed (and sometimes I have to include myself here). The Music Business will be a wonderful case study to illustrated the argument – in ten years. Right now, the industry is still struggling to come to terms with its new economics.

Yesterday Wired News informed about a policy conference held by the Future of Music Coalition in Washington, DC this week. The predominant idea was apparently that everybody involved in the business – musicians, independent and major labels, politicians, consumer electroncis and computer manufacturers as well as consumers should try to seek a compromise regarding the alleged problem of unpaid digital downloads. Jenny Toomey, exectuive director of the organising committee summerised the general approach as follows – “I think we’re looking for a kinder, gentler, more equitable model where more people can make a living off of this stuff.”

Sweet. Lovely. But I don’t get just why so many people in the industry can’t seem to see the wood for trees. There’s no real need to sit down and hold hands for all these groups with seriously conflicting interests. This is one of the instances where the market is actually going to solve the problem (in the longer run).

Sitting down and holding hands will only serve the interests of those who are trying to extend the cash flows of times past into the digital age while they are transforming their business to become less dependent on record sales – there’s a reason why vertically integrated media conglomerates are flooding our screens with instant-star shows. Teenagers (still one of the industry’s most important target group) may buy (~15%) less records these days than they did before Napster, but now they watch more advertisments.

Information goods are tricky when it comes to economic analysis. This even more true in the case of music. As opposed to most other products, economics have a hard time telling us about “the optimal level” of music production and consumption. What’s even more important – most models don’t take the intrinsic musical motivation into account. Given that most people create music without ever even intending to make money with it, those models are not exactly representing reality.

The new digital distribution model allows to target smaller audiences and make more money than before – if you do it correctly. However, while a lot of musicians who have not been able to live off of their art in the past will increasingly be able to do so in the future, it will be much more difficult to get into the average Madonna income range by performing music. The current winner-take-all market structure will likely disappear.

I find it startling that artists like John Flansburgh of They Might Be Giants say that they would prefer the semiotic control of a major label’s product manager to the control exercised by an audience/market. Wired cites Flansburgh saying that “it’s ironic that we’ll miss the majors when they are gone.” Madonna might. You probably won’t.

While electronic markets for music are still in their infancy, things are already changing with the advent of useful machine listening software. Just think about a catalogue of all the music that matches your style preferences, whoever wrote it, whoever performed it.

According to the article, The Hooter’s Eric Bazilian stipulated that “[t]here’s an incredible amount of mediocrity,” due to the reduced costs to produce songs and put them on the web. That is very true. But there are also so many gifted, struggling musicians who never had a chance to create a market for their music because of the Major label’s gate keeper function. Now they are able to reach an audience and transform their cultural achievements into a product. I don’t understand why a musician would believe that it is a good thing to keep music from being published?

There will be new sources of information, like trustworthy journalists reviewing new songs, online fora. People providing valuable services, possibly for money. Or, as I believe, there will be quality settings in the machine listening software allowing the customer to get exactly the recording quality she wants.

Don’t tell me people would not want to pay for such a search engine which, in turn, would be able to pay for the creativity. Not the amount BMG pays Withney Houston, obviously.

But there will be a whole new middle class of artists. And they don’t need to sit down with anyone. They just let the technological development work in their favour. And in ten years, they will teach the music industry case study. If the latter should not be able to use its political clout to perpetuate its current powerful structure into the digital age.