The sale of social networking site Bebo.com to AOL last week for $850 million prompted Billy Bragg to write an editorial in the New York Times about how artists are getting shafted out of royalty payments by web 2.0 websites who use their work to build their businesses. Though it's true that every artist that creates a profile on MySpace or any other social networking portal is legally waiving their right to royalty payments, he raises a good point: musicians and record labels using these sites to communicate to their fanbases are underselling their own worth.
I just spent a week in Austin, Texas for SXSW and I observed two completely different business cultures at work; first, the "interactive" (internet) dudes held court, then later in the week most left and the town gave way to the music fest folks. The vibe in the conference center spelled out the different trajectories of the two industries. Venture capital is currently pouring cash into every half-baked disemvoweled idea set to a powerpoint deck, so the internet guys are whooping it up. But as the music panels began the central theme congealed fairly swiftly: abject fiscal despair.
This much is clear: the retail market for music is drying up. But that doesn't mean it's time to fold in cards.
Here's an assertion: if you add up the total audience for social networks on the web today, I doubt they'd be even a third of the number of people who are actively engaged with music. Social networks have been widely discussed but they haven't had nearly the same effect on our culture as the "iPod revolution." The music business hasn't yet found a way to account for this entire audience yet but it's clear that filesharing has had an interesting side effect: our aggregated audience has multiplied. And the software guys (who are know all calling themselves "media guys") all want a piece. As they should. Because without "content," all they can do is build utilities. Plumbing. Have fun with that, fellas.
Here's the value proposition as it stands today. The social networks provide a band with easily updated HTML pages, a URL, and a flash player. In return, a band directs its audience to the webpage and the business profits by selling display advertising. But because these networks sit forcibly between the band and its audience, and don't allow direct communication with it outside of these "walled gardens," bands are inadvertently selling their Manhattan islands for wampum beads.
It would be wise for the independent music industry to begin considering the phrase "social software self-sufficiency." And then a phrase they already know quite well: pay me. (Unless of course the software project is being built to benefit the common good and is being run by your favorite non-profit.)