Startups, Not Apple, Lead Music Industry's Rebirth

NEW YORK (TheStreet) -- Given the constant sniping over royalties it might not seem like it, but we're in the early stages of the best days the music industry has ever seen. Of course, the music industrial complex doesn't know this. And it suppresses most positive whiffs of change because the notion of the old way of doing things disappearing scares the hell out of its entrenched figures.

The executives who run record labels fear young, bright, thoughtful, well-educated or self-taught tech-minded entrepreneurs. Known entities such as Tim Westergren of Pandora ( P) to relative unknowns such as Harvard-educated Dan Gurney. I wrote about the company Gurney co-founded, Concert Window, Monday on TheStreet.

As Gurney explains in this excellent blog post, the days of middlemen in the music industry are going away. Fast.

That's exactly what terrifies cigar-smoking label execs. Because it's really an across-the-board phenomenon, sort of like what we witnessed (and are witnessing) as Amazon.com ( AMZN) transformed (and continues to transform) the book publishing industry.

The music industrial complex desperately wants Apple ( AAPL) to save it from itself, however, as I have explained in detail elsewhere, Apple looks out for nobody other than Apple.

Steve Jobs redefined the record album, shifting the business to an a la carte digital download model. Now, with that route dying, Apple hedged its bets by introducing iTunes Radio -- in part, as a promise to keep people buying music via its one-click system. As I discuss in the above-linked articles, if this strategy fails, Apple still wins and the music industrial complex loses. Apple can rest easy on its mobile advertising revenue bump, partially fueled by streaming radio, and the use of iTunes Radio becomes just another feature to sell hardware.

It doesn't take a scientist who takes apart rockets (dissects frogs or runs rats) to figure that much out. It doesn't even require a Harvard grad. However, given the number of blind eyes turned to reality among established music people, I guess these flavors of accomplishment and intellectualness help.

As Gurney does in the aforementioned blog post, I'll take things a step further with this Apple analysis.

Apple rides both sides of the fence -- between downloads and the access model (meaning you don't have to buy music, you can access it for free or for a nominal monthly fee). This company is nimble enough to shift to wherever the consumer market shifts. Plus the revenue it derives from selling music means little, if anything, to it. Again, for Apple it's all about selling hardware.

Apple doesn't care how it delivers content to customers. To reiterate -- it just wants to sell iPhones, iPads and Macs. For as much as Apple disrupts, for all intents and purposes it sits on the sidelines vis-a-vis this unprecedented music revolution.

In this new world, as Gurney states, a whole slew of middlemen disappear:
... power is shifting to the musicians. That's a good and bad thing. Good, because musicians don't need permission to release a new video or distribute a new album to all the online retailers. Bad, because who is going to put up the money for that album?
That's where Kickstarter comes in. We all know that musicians don't have a ton of capital. But there is power in numbers. And when fans band together and contribute a little something each, a significant dollar amount can result -- enough to fund that ambitious album that wouldn't have been possible otherwise.

Gurney likes Kickstarter. And I like his company, along with the many other fantastic, seemingly under-the-radar music-related startups I have been writing about over the last year.

From monetizing performances to selling tickets to ending pay-to-play to drumming up support (and cash) for the next record, names such as Concert Window and Ticketfly, alongside more established companies such as Pandora, operate as platforms musicians -- at all levels -- can access directly. This eliminates the need for major record labels and redefines the place of the independents in musicians' lives.

Just as major authors have jettisoned large book publishers, an increasing number of acts will bypass the big three record labels (and their imprints) to go it alone or partner with a righteous indie label. Many already have.

Soon, the record album, as we know it, will disappear. In today's world there's no need for it to exist. It only remains a fixture because it's a leftover bit of grandfathered-in protocol of the major labels. But they no longer call the shots.

Simply put, we're witnessing an unwinding. Too slowly for some us but surely, without doubt.

Just as it takes time -- from physical and emotional standpoints -- to extricate yourself from an abusive spouse, the shift away from the major labels and all the inane and unnecessary accoutrements of the music industrial complex will take time.

These guys put all of this overhead and contractual lingo in place for a reason -- they're an insecure bunch and over the years have taken advantage of musicians who, at day's end, are smarter than they are. What goes around comes around. It's time for the folks with the best interests of the music industry in mind to take the keys and not only send this thing in the proper direction, but unleash its full data- and technology-driven potential.

Apple, of course, will sit back and operate under any environment these new forces serve up. And they'll continue to sell millions of devices every quarter, which, for Apple and, ultimately, for musicians, isn't a bad thing.

-- Written by Rocco Pendola in Santa Monica, Calif.

Rocco Pendola is a columnist and TheStreet's Director of Social Media. Pendola makes frequent appearances on national television networks such as CNN and CNBC as well as TheStreet TV. Whenever possible, Pendola uses hockey, Springsteen or Southern California references in his work. He lives in Santa Monica.

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