Monday’s issue of the New York Times carried a feature on Rick Rubin, co-founder of Def Jam, and now co-head of Columbia Records. It’s an insightful review of the man, his history and the challenges facing the music industry. It seems that there are no opportunities.

In summer 2007, Columbia Records began an internship for college students. Focus groups were held to find out what they thought about music. The conclusions of these confirmed what was already known: no-one listens to the radio, people steal music, and virtual social networking is over – word of mouth replacing the likes of MySpace and Facebook. Most didn’t know that record companies make no money from merchandise and tours.

The social network aspect is interesting. The problem with MySpace et. al. is that it’s not geared towards music. In order for social networks to work with music they need to embrace the unique properties and demands of music: people need to be able to listen, share and recommend music. Sites like Pandora and Last.fm achieve this by gathering like-minded people together to discuss and recommend music. On top of this, they analyse listening data to recommend music automatically. I’ve found lots of wonderful music this way. If I was an artist trying to start out today, I’d go with a Last.fm profile, rather than a MySpace profile. This puts a musician directly in touch with a potential audience.

Most people have latched onto Rick’s suggestion that the future of the industry is a subscription model, with subscribers paying a monthly fee to have access to all music from anywhere. He explicitly links the payment of low-cost subscription fees with a reduction in the amount of theft. Whilst this might deter some, it’s the corporate devaluation of music that leads people to conclude that it can be stolen. For those who love music, the idea of subscribing to music which you rent rather than own is abhorrent. For others, music simply isn’t worth paying for anyhow, no matter how low the cost.

The other co-head of Columbia Record is Steve Barnett. He’s pitching an idea to Rick to ask Columbia artists to give them up to 50% of their touring, merchandising and online revenue. This is insane. Artists need revenue from these activities because they’re given such a raw deal by their record companies. In any case, touring rarely makes a profit, even for well known artists.

As a result of this long term mistreatment, artists are gradually finding their own way. The most common approach, which dates back decades, has been to set up your own record label. Now that music can be marketed and distributed digitally, there’s less inertia in getting started. Revenue can go directly to an artist. However, as we’ve seen with iTunes, going with a corporate distributor can led to even less revenue for the artist than with traditional CD sales. There are viable alternatives:

Let’s go back to the de-commodification of music. 50FootWave’s Free Music EP, which can be bought on-line, is also available for free. Jamendo is a website that offers music under the Creative Commons license. Artists post music to the site for free, unlimited downloading. Some use this as a means of making their demos public, others as a way of getting their music known. Payments are optional.

Jane Siberry set up “Self-Determined Pricing” on her store a few years back. Visitors can buy, donate or download for free. Perversely, this has yielded greater income than just a standard price per track system. Such is the loyalty of fans. Indeed, the direct relationship between fans and musicians is the future of music, without the record companies. Technology is now enabling this to happen, both in the act of producing music and distributing it.

Jane’s also been at the forefront of an alternative way of funding music. As Issa, she now offers studio sponsorship. Patrons pay a daily rate to fund studio time. She’s not yet decided how to release the resultant recordings (which I’m sure should have been part of the initial definition of sponsorship).

Kristin Hersh has launched CASH (Coalition of Artists & Stake Holders), perhaps the ultimate in making a direct connection between artist and listener, a “cooperative”. Subscriptions and donations will be used to enable Kristin to release a new studio recording every month, each of which will be freely available.

Musicians are beginning to realise that steps through a career don’t need to start with the usual gig, record deal, album approach. Just getting music out there to (potential) fans is the most direct way of beginning or sustaining a career. I think the record companies realise that their dominance is expiring and the subscription model is a futile attempt to prolong their revenue stream. One day record companies will cease to exist, instead replaced with thousands of direct relationships between musicians and listeners. Which is just how it used to be.