As the music industry continues to work through its current identity crisis, players and pundits alike can only guess where it all will lead. One thing is for sure, the rules and the tools are changing at warp speed and only the willing will thrive.

According to industry insider and visionary, Robert Goodale, record labels that still cling to the 20th century business model are especially vulnerable. "I would bet against them," says the former executive VP and head of business affairs for Isolar Enterprises, which guided megastar David Bowie’s many ventures in music, film, new media, corporate and financial areas. "The difficulty", says Goodale, "is that you have an organization that’s addicted to fixes. But history says that when you have radical changes like this, the incumbent very rarely makes the turn in the road. It doesn’t mean that they cease to exist. It just means they kind of go into this flat-line state, and the baton passes to someone else."

Goodale should know. As we discussed in part 1 of this series, Goodale and Bowie realized that the industry's traditional structure was dissolving, prompting them to launch UltraStar in 1998 which pioneered online communities linking artists with their fans and providing interactive fan management services for Bowie and other mega artists. "Record companies above all else are in the business of selling music," he says. "What we wanted to do was to find areas that were not fully appreciated."

Goodale believes there are just some things that labels don’t have the aptitude (or in many cases, the will) to do "Labels don’t know whether they should be taking this on or not. The following statement always gets record labels irritated, but the fact of the matter is that record labels have never done well at what the record labels define as ancillary revenues. They mess it up."

UltraStar consciously pursued activities that enhanced rather than detracted or competed with label activities. "We didn’t want to go after revenue sources that would say to the label that the artist is declaring war on them."

Other innovative upstarts, however—such as Napster and the clandestine peer-to-peer services and paid download sites like iTunes—cannibalized traditional label revenue streams and ultimately challenged the very definitions of traditional industry roles such as the record label. "If there’s anyone who comes closest to being a label right now, it’s Steve Jobs," says Goodale.

Some may quibble with that comparison, but it’s certainly not crazy talk. In fact, as Jobs and other techies create hubs around communities of music fans, it’s hard to know where labels or even artists will fit into the overall structure.

Goodale suggests that a more structured peer-to-peer file sharing system could actually become the next profit center—similar to days of yore when pirates finally adopted a code of conduct for raiding and plundering. "As it turned into a business, they got tired of the idea that some young pirate was going to come and steal from them," he says. "They came up with rules: ‘we promise we won’t steal from you, and you promise you won’t steal from us.’ Yesterday’s pirate will be tomorrow’s media mogul."

Goodale also sees a big future for mobile technology, which he thinks will converge with the "live" experience sought by so many music fans. After all, most artists have known for years that they could make a lot more money performing in live shows than in waiting for the record labels to pay them royalties on album sales (the complexity of the splits in the music industry are, of course, legendary). Goodale, however, says the merger of live shows with technology should be quite powerful.

Technology such as Short Message Service (SMS) could really have an impact on additional revenue streams and fan outreach. Simply put, SMS allows subscribers to send and receive text messages and emails to and from mobile phones (read the 
Fan base Management story in this edition of AtlasPlugged).

Imagine, for example, that somebody sends you an SMS message from a live Rolling Stones show, and maybe it includes a link to a Stones-sponsored product or service. Goodale sees gold in them thar' hills. "Someone’s making money off the SMS," he says. "If it’s set up properly, the Stones are making money from that follow-on message. This all has to do with a real-time experience and the affinity associated with it, and the fact that I want to be part of it."

Cell phones, according to Goodale, will play a critical role in the new music industry, perhaps even becoming a savior of sorts as the industry seeks out new vehicles to spread its products. "The phone is something that the music business has never had," he says. "It delivers the consumer experience. It delivers the store. It delivers the radio function. And it delivers mobility. The idea that those functions can all be combined in a single thing is mind-boggling."

Of course, it's unlikely that technology like this will replace the more traditional methods of touring, promoting and reaching out to fans any time soon. But it does super charge your efforts.

The bottom line: You don’t have to be David Bowie to be an UltraStar (at least figuratively). In fact, adopting some of the strategies that Goodale and many others espouse is really a mental state—whether or not you ever get the fancy cars and mansions to show for it. The music playing field may never be completely level, but it’s a lot less steep of a climb than it used to be. Ya never know: Think like an UltraStar, and you may be half way there

(Mike Grebb is a writer, journalist and singer/songwriter based in Washington, D.C. He has written for numerous publications, including Wired and Billboard. He just completed his debut solo record, Resolution, which is available at www.mikegrebb.com).