I think it's safe to say that it's obvious that the music industry is undergoing drastic changes. Why?

The simplified answer is that consumers were demanding more and convenient ways to access music and the music industry resisted change, opting to stick to their existing lucrative business model. That allowed entities like Napster and Lime Wire to grow and flourish because they provided new capabilities with the advantage of free music.

What new features have users been wanting? They are:

- Ability to have music in an electronic format, doing away with bulky physical media

- Ability to have music significantly compressed into a small file size

- Ability to listen to music across multiple devices and formats, rather than having to pay for it multiple times (tape, record, CD, iTunes, etc.)

- Ability to discover new and sometimes rare music

- Ability to quickly download music, whenever it was desired

- Ability to get individual songs, rather than buy a whole album for the 1 song they wanted

- Lower prices

Unfortunately, Napster and the subsequent free music services lead to consumers getting used to having access to free music. Instead of the music industry embracing these new technologies and services, they spent a lot of time and money trying to shut them down.

The other problem with the existing (Music1.0) industry was that most artists that signed with a label had a hard time making a living. If an artist was deemed good enough to sign with a label, they would be forced to sign away all their music rights in exchange for the ability to get recorded and gain exposure from radio play, which was a costly venture. The labels would provide everything for the artist so that they could focus on their music, but at what price?

The costs associated with recordings usually were quite large and most artists would never be able to pay back those 'loans' with their record sales. And the small percentage of profits that artists received were not enough to sustain them, so they were forced to make their money from touring and selling concerts souvenirs like t-shirts and CDs. Very few artists were successful enough to make a good living from this model, yet the music industry managed to be extremely profitable for many decades.

A model where the middle-man makes the most profit is simply no longer sustainable due to the fact that consumers are not willing to pay as much (or anything) for their music and most artists already are not making a decent living. Something has to give and it certainly can't be the artist.

To make things worse, due to the fact that the music industry is now making lower profits, they've compensated by signing fewer artists and providing fewer benefits to those artists. And the old distribution model has fallen apart with only a few records stores left selling just a few popular CDs.

The result being many smaller labels sprouting up to fill in the void, along with many online solutions as well. Regardless of where an artist goes for help, the belief is that money can't be made from music sales, giving a whole new relevance to the term, "struggling artist".

Is there a solution to this problem? Music2.0