His new book - The Future of Music: Manifesto For The Digital Music Revolution (co-written with music futurist and strategic consultant Gerd Leonard) - urges the music industry to acknowledge 21st century realities and to embrace rather than fight the opportunities available.

As physical CD sales continue to plummet and attempts to create Byzantine copy-protection schemes sputter and fail, the authors boldly assert that music will move like liquid (hence the music-like water analogy) and will stream from every screen, network, crack and crevice.

According to the authors, the record industry, as we know it is dying, but the music industry is more vibrant than ever. While the old guard may be reluctant to embrace their manifesto, plenty of people are taking their message to heart.

This month in part 2 of the series, we wanted to cover some of the details of this bold vision. The big question, of course, is how artists, managers, labels and other cogs in the music machine will make money in this new music economy if so much of the music is free.

While you can't blame the record industry for wanting to maintain control of the flow (how do you think they became a multibillion - dollar industry after all), the future has already come knocking. Like it or not, the digital revolution has turned the pyramid upside down by handing control over to consumers. The industry can either figure out how to use this new reality to its advantage or continue to resist it until it's dragged kicking and screaming into the future or goes the way of the horse and buggy. I'm reminded of the Stars Wars theme that fear leads eventually to the Dark Side. The music industry sometimes seems reluctant to embrace a potentially bright future out of fear of the unknown.

In Kusek's and Gerd's new music landscape, artists- not record labels- will sit atop the food chain. Most artists these days are savvy enough to realize that signing with a major does not often result in vast riches, or a long-term career. "It's a misconception that if you sign a deal with a major label, you'll make a lot of money off of royalties," Kusek says. "That's hardly ever true." Rather, that big advance is probably the only money a band or artist will ever see from the label. Why? Because of the complex accounting systems used to break out CD sales. (These formulas tend to favor the label, distributor and retailer more than the artist. Imagine that).

Kusek believes that CD-centrism is soon coming to an end. "Artists are going to make money in the future off a variety of revenue streams instead of just one," Kusek says, citing a vast universe of merchandise, including DVD's, books, clothing and other must-have items for fans. The music may be a mix of paid and free fare, all fueling the cult of fandom that increases live show attendance and/or sales of other products built up around an artist. And don't forget digital downloads and paid streaming services. Who knows? Once liberated from relying primarily on CD sales, "you start to look at file sharing a little bit differently," Kusek says.

Of course, some artists will do better in this regard than others (and certainly, many artists shun the idea of making themselves into a "brand" to be marketed like laundry detergent). But for artists who are looking to embrace the power of the Internet and related digital technologies, the opportunities to take advantage of this future are already right in front of them.

Managers will also move up the food chain according to the Kusek/Gerd scenario. But it will be a new breed of manager. More comprehensive marketing gurus familiar with new technologies and consumer realities will replace managers who simply focus on getting a band signed. In fact, we're already seeing the rise of the "super manager" who in addition to shopping to labels, can also devise an overall business plan that includes touring, merchandise strategies, licensing opportunities and even commercial and product tie-ins (if the artist is cool with that).

Above all else, the manager of the future says Kusek, should understand direct marketing techniques, which have increased in importance over the years. "These kinds of skill- that's the package we recommend," he says. With the Internet, mobile phone messaging and other technologies, it has never been so easy to keep fans abreast of artist activities. "You can involve them more in your career" says Kusek. "It's direct marketing 101. It's developing relationships with your customers. That’s a skill that's really important." Above all else, artists need to surround themselves with good people and think outside of the box. "You have to be creative," he says. "It's hard work."

Highlights from the Manifesto
The book is actually a pretty quick read that touches on just about every aspect of the business and how it’s changing. So you should definitely check it out. It contains a lot of great details about how that whole “music-as-water” thesis fits into the reality of the music business. You don’t have to agree with every point, but this book will get you thinking nonetheless. Here are a few random outtakes for you below.

Embrace new avenues – One thing this book does well is point out unlikely avenues that are fast becoming music marketing powerhouses. One is the emerging use of music in video games, which are fast becoming the MTV of the new millennium in terms of exposing people to new music. Another is the use of cell phones and other wireless technologies to both distribute music as well as directly market it to consumers. Already text and picture messaging makes it possible for artists to send fans tour information or background wallpaper. And ringtones have become a multibillion-dollar industry. Kusek and Leonard even postulate about an all-in-one device (perhaps only a few years away) that will act as a person’s primary digital entertainment center. In fact, that’s already happening. New devices such as the Gizmondo (www.gizmondo.com) and PSP (www.us.playstation.com/psp.aspx) already combine gaming, videos, pictures and music along with wireless networking.  

Take a Lesson from Porn – One interesting section points out that at the dawn of the World Wide Web a decade ago, the old pornography industry went through many of the same problems now faced by the music industry (I’ll avoid drawing other moral analogies). Consider this passage from page 74: “We believe that the online music business will follow the same pattern that the online porn business did, in the sense that the Internet will break the monopoly on distribution of music that the majors have enjoyed since the invention of the phonograph. The major recorded music labels first established their own branded Web sites to promote their new releases, much in the same way Playboy et al established their first sites as extensions of the magazines. Both the entrenched porn kings and the music kings failed to see the potential of the Internet for new business models, and were caught entirely off guard by what happened.” Some might argue that the labels’ continued obsession with paid downloads is merely an extension of the album-sale model. Pornographers, on the other hand, eventually gave up on the magazine model and used viral marketing to promote each others’ sites. Give people an easy way to sample similar artists on the spot (with much better “collaborative filtering” technologies to help them find new music) and the viral effect occurs through “the linking of apparently random things into some kind of order,” states the book.

Read Chapter 7 – You’ll find much insight about how the digital revolution has created a new music economy. As more money shifts toward digital distribution of music, Kusek and Leonard argue that the relationship between artists and labels must change. Digital downloads have already forced labels to re-evaluate royalty structures, leading to more transparent compensation schemes for artists. In the future, record labels could also become artist partners rather than just banks and distribution lords. They could offer a range of services, including management and booking, that go well beyond a label’s traditional role (EMI has already signed these kind of deals with Robbie Williams and others). The bottom line is that power is shifting into the hands of artists, who have more distribution and promotion options than ever before because of the Internet and new technologies. Labels that don’t take a more holistic view of the label-artist relationship could perish.

(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).