One possible answer that seems to be gaining traction: the fans. New online music companies are jumping on the "crowdsourcing" bandwagon by allowing fans to discover and finance new music themselves. These companies are confident that we, as consumers, are willing to spend $10 to commission an album from an up-and-coming artist we believe in, especially if it will score us preview copies, private shows, and other exclusive access. After all, music fans, more than anyone, want to feel we're intimately connected to our favorite artists.
One of the more established of these sites is four-year-old ArtistShare.com,  which represents some household names, including Rick Moranis (he’s not just film’s most famous shrunken dad—he’s a country singer too!), Trey Anastasio of Phish, and Maria Schneider, who won the label its fourth Grammy in February. ArtistShare allows fans to invest anywhere from $9.95 a share to a whopping $18,000—enough for an Executive Producer credit on the album. In exchange, the investor gets an exclusive window into the artist’s creative process through video diaries and early recording samples. A major reason Grammy award-winning artists like Schneider are choosing to stay with ArtistShare instead of graduating to a “real” label: the 85-percent cut the company gives its musicians dwarfs traditional royalties.
A newer, hipper site that has gotten media buzz lately is SellaBand.com , whose tagline is "You are the record company." They've been busy proving they're as legit as any major label: they got a former Sony BMG exec to sign on as managing director, Heineken's onboard as a corporate sponsor, and they recently struck a distro deal with Amazon. Any artist can upload songs to Sellaband.com, where so-called "Believers" buy shares for $10 apiece. Once a band reaches the $50K mark, it gets studio time with a big-name producer. The company, artist, and investors then split album revenues three ways. SellaBand’s motives have as much to do with aesthetics as profit. Pim Betist, who left a high-paying job in the oil industry to become Creative Director of SellaBand, sincerely wants to fix a broken industry by opening doors for obscure bands. “The music industry is about to die because they have been too focused on overmarketed superstars instead of quality music,” Betist says.
Even seasoned musicians are defecting from record labels and choosing to go the fan-funded route. Some of these artists, especially those indie rockers who don’t fit the Avril/Britney mold, are tired of the creative restrictions imposed by labels. Jill Sobule, who scored MTV hits with "I Kissed a Girl" and "Supermodel" in the 90s, was tired of being passed from label to dying label, so she opted out. Instead, she is choosing to raise the $75,000 needed for her new album through the donation website JillsNextRecord.com . For $10, you’ll get a free digital download when the album is finished; a $200 donation will get you free admission to all her 2008 shows; and for a $1,000 donation, she'll write you a personal theme song.
Of course, this public microfinancing model has its shortcomings. For one, splitting revenue with thousands of fans the way SellaBand does is an SEC nightmare. And while believers like Betist are touting democratization—fans can seek out quality music directly, instead of relying on labels to dictate what's listen-worthy—many listeners prefer a curated experience. In fact, if you visit SellaBand, you’ll notice there are a handful of bands that are extremely popular, while the rest have relatively few pledges. One theory: Because you can see how many pledges each band has accrued, you’re more likely to listen to (and therefore sponsor) the band with the illusion of popularity. In other words, few people are casting votes based on their unbiased opinion of the music’s merit.
In 2006, Columbia University network theorist Duncan Watts did a study  on the effects of social influence on musical tastes. He posted 48 songs on a Web site and recruited subjects to vote for the songs they liked. The participants were sorted into eight groups—some voted blindly based on their personal preferences, while others could see how their fellow group members were voting. The results: All the songs were rated fairly equitably in the merit group, while in the social group, a handful of songs surged to the top. What’s most interesting is that between the different “social-influence” groups, there was almost no overlap among the top and bottom songs, suggesting that any inherent quality the songs had was irrelevant. Instead, the tracks that rose to the top were the tracks that happened, arbitrarily, to get the first votes.
It's hard to say whether a model that blends microfinancing and social networking will prove financially viable. When I met with Betist in February, only 14 previously unknown bands had hit the critical $50K mark. And ArtistShare, which is the most established contender in the category, earned just half a million dollars last year. But calling on fans to sub for record labels is a promising option in an industry that desperately needs fresh ideas.