Digitization has a disruptive effect on a wide range of industries, from music to software to publishing to...you name it. If it can be digitized, it can be disrupted.
It's therefore encouraging to see the music seemingly converging on a cool new-old model: an ASCAP (American Society of Composers, Authors, & Publishers)-like tax from one's Internet service provider that allows unlimited downloading of music.
Gerd Leonhard's recent presentation on the subject is the best I've seen yet, one that I'd recommend you review, even if you never stray from the software world to think about music:
Leonhard argues that digitization has made a control-based music economy impossible, forcing the industry to seek other ways to monetize music--ways that conform to digitization's abundance, rather than to the old idea of scarcity.
In a sign of things to come, the Isle of Man just approved "a single blanket fee (that) will cover unlimited download activity for all 80,000 or so...residents," as Ars Technica reports.
This follows a new trend toward "free" services, in which the music industry hides the cost of the music in the price of a separate service or device. It's oddly similar to trends I'm seeing in software.
This isn't the only model. As the Future of Music blog points out, some musicians, like Corey Smith, are finding that giving away music to drive more concert ticket sales can be a winning recipe. But while $4.2 million last year for Smith is a great return for an individual artist or band, it's not a great way to build an industry. I'd liken it to "lifestyle" software businesses that generate great revenue for their founders but provide little in the way of equity for other participants in the company's success.
So I think the "adoption tax" model is promising. The future is flat-rate: you subscribe, you forget about paying for individual transactions, you enjoy more music than you ever have before.