I think I just brainstormed out a new business model for the music industry. Imagine this... [cue dream time music from Wayne's World] In the future there are no major record labels. [Add doomsday scenario from your favorite science fiction movie] In the future, artists must attract a new form of backing: venture capitalist that works solely in music. The "Music VC" looks for new talent and then signs them up by agreeing to pay for the first record album or single. In exchange the Music VC gets a percentage claim on all record royalties. The Music VC takes the artists over to his office where he has a staff of graphic artists, retired musicians and arrangers, lyricists, recording engineers and creates a master tape and full art work for the initial CD (SACD?). Recording engineers may even form an artists’ collective as could any other specialty like art designers, lyricists, etc. The Music VC takes the artist over to the local JVC pressing plant manager who gets paid upfront the cost of replicating the discs. The Music VC can lower risk by initially releasing single or several songs on MP3 site (low compression please!). Many Music VCs may band together to create highly efficient and legal download sites as agreed to previously by artist – a condition of their funding. In some as yet undetermined split, the artist collects a portion of the sales revenue minus all production costs put together by Music VC. Production costs include session fees (engineering, tapes, mics, labor), back office financial keeping, any fan base management, art work generation, modest amount of A&R work, etc. Music VC essentially owns equity musician’s catalog. Maybe 20-50% of first album and lower percentages of latter releases accrue to Music VC for his willingness to take a risk. Better Music VCs develop relationships with certain entertainment outlets like Radio, Entertainment Tonight, CNN, Fox News, HBO, etc. At the end of the day, the musician owns direct equity in his own content. There are no loans made up front in cash that have to be paid back, so the personal finances of the artists are more conservatively managed. Really high quality talent can attract more Music VCs so they get better terms and better distribution which may mean more traditional outlets. Tower and other retailers contract directly with Music VC who manages distribution. Since entire business model is run as private equity function, Music VCs can attract funds for investment from Wall Street, bypassing current system of shareholders providing capital to highly inefficient entertainment conglomerates that earn low returns. Music VCs can raise capital on Nasdaq once big enough. Artists can raise capital on Nasdaq once big enough. [I also am tempted to say we can short the artists we think are fads or outright suck. ] SUMMARY OF PROS AND CONS: Upside Good talent (and bad) gets rewarded based on subjective merit. Everyone can get funded. Lower costs in production system due to specialization. Movement away from “star system” where only million unit sellers are rewarded. Ability for the Music VC to take chances that major record labels shy away from. Music VCs have role of financier and producer. They aggregate all the right people to launch first CD and subsequent releases. Ability to specialize in genres where expertise can be developed. This should prove better than major labels myriad mix of niche labels and mimic the best of independent producers. Maybe Chad Kassem of Acoustic Sounds is the first Music VC based on his superb work in Blues genre. Downside Less synergies with large interests in multiple entertainment media (cross-promotion) Music VCs may take time to develop their own sources of capital like early technology VCs. Requires risk-reward mindset not currently ingrained in today’s business. What do you think? Isn't this a better world for artist, Music VC (producer), and, most importantly, consumer?