And then there were three.

The bidding war for EMI — the record label behind Katy Perry, Lady Antebellum, and Coldplay — is over. A consortium headed by Sony (SNE) agreed to pay $2.1 billion for EMI’s publishing business earlier this month, while Vivendi’s Universal Music was the last suitor standing with its $1.9 billion bid for the label itself.

Breaking EMI in two was inevitable, but the meaty morsel here is that EMI’s publishing arm sold for more than the label itself. In other words, EMI’s past is more valuable than its present and future.

Need a Tissue?

There aren’t too many people mourning the passing of the major labels. The labels and their thin artist rosters monopolize the already limited playlists of commercial radio. Then there’s the negative publicity stirred up when the label-backed RIAA went after unemployed moms downloading tracks. Music piracy is a problem that needs to be addressed, but the labels didn’t do themselves any favor by making it personal.

Even the fact that Universal will now control nearly 40% of the market — leaving Sony at 30%, Warner Music Group at 19%, and a smattering of indies battling for the rest — is unlikely to raise eyebrows with antitrust regulators. Prerecorded music has been a fading industry for years, and herding struggling labels together will only make it that much easier to identify the remains.

The Gradual Fadeout

CD sales peaked in 2000 when the labels sold 942 million units, raking in $13.2 billion in sales. It’s been pretty much downhill the rest of the way.

Digital sales were supposed to save the day, but the label-backed MusicNet and pressplay initiatives were too restrictive. It didn’t make sense that music lovers had to jump through more hoops to pay for music than the pirated options available on peer-to-peer file-sharing networks.

Apple (AAPL) finally got it right with the iTunes Music Store, which launched in 2003. Labels didn’t like the $0.99 price point for singles. Artists didn’t like the pricing either, since it found consumers cherry-picking the songs they actually liked instead of paying $9.99 for complete albums. However, Apple’s storefront was far better for the industry than the piracy alternative.

Legal downloads should have been the industry’s salvation. Record companies — what were then five major labels and countless independents — would benefit from the benefits of digital distribution. Labels wouldn’t have to worry about pressing and packaging discs. There were no shipping or return hassles. Apple did all of the work, and labels got to keep roughly two-thirds of the sales. Unfortunately, it didn’t play out that way. The growth in digital music — which by 2008 found Apple replacing Wal-Mart (WMT) as the country’s largest music retailer — wasn’t enough to offset the serious slide in CD sales.

Internet Killed the Radio Star

What went wrong? The labels will point back to Napster, LimeWire, Kazaa, and other disruptive peer-to-peer networks that swayed countless Web-savvy users to download and share pirated tracks. They’re right, but there’s a bigger picture that the major labels are missing.

The Internet made it easier to swap virtual mix tapes, but it also armed garage bands with the tools to get noticed. The playing field was leveled as artists set up MySpace music pages and uploaded tracks to the original MP3.com website.

Where would Justin Bieber or Susan Boyle be without YouTube? How many bands are scoring national attention through Facebook fan pages?

For better or regrettably worse, everyone’s demo tape is now a click away.

Who says you need a major label for digital distribution? Getting your music on iTunes, Spotify, or any of the popular e-music stores and streaming sites will cost most artists less than a video game.

In terms of getting noticed, setting up pages on YouTube, MySpace, and Facebook are no-brainers, but music-dedicated sites including Bandcamp and SoundCloud are also there for promoting your digital presence.

The opportunities keep coming. Google (GOOG) introduced the Google Music Artist Hub last Wednesday, giving artists a free way to get their music available on what are now 200 million activated Android devices.

Last Round for the Music Moguls

The record companies aren’t worthless, even in this scorched climate. Even if CDs go away, there are still promotional, radio, and touring benefits that are easier to secure under a major label. The problem for the prerecorded music industry is that the gap between the signed and unsigned has narrowed.

Even proven bands are finding it more lucrative to leave their labels and strike out on their own. As home recording equipment gets better and cheaper, record companies are no longer necessary to bankroll the once costly recording sessions.

Labels used to love signing artists with established followings, but now those same artists are wondering why they should be tied down to long-term deals when they have the digital distribution tools at their disposal to reach their growing audiences.

There’s a new world out there, and its soundtrack is being scored by unsigned artists that you don’t know — yet.

Do I really need a website for my music? With Facebook, Twitter, and all the musician-specific social networks out there, you might think that your own .COM is obsolete. But there are 3 very important reasons to drive fans to your website instead:

 

1) You own the address -

First and foremost, you own your .COM address. As long as you maintain it, it will always point to your website. This is powerful — you are guaranteed to own that little slice of the Internet. Even if you switch companies that host your website, your .COM can be transferred, so your fans will always be able to find you.

This is not the case with your social networking profile. They can get bought out, lose out to competition, or simply become un-cool. Thousands of bands relied on their MySpace page as their home base, then switched over to Facebook (after printing their Myspace URL on their merch… ouch!).

This isn’t limited to MySpace. Those of you who’ve been online since 2000 will remember sites like Garageband and MP3.com. Who knows what will happen in 5 years? Will Facebook still be around? Twitter? Google+? It might be an entirely new social networking site that will be “THE” place to have a profile. Your best bet is to make sure that you always have a place where fans can go to find out about your career.

One last point about social networks: if you’re really unlucky, you may wake up to find your social network page repossessed. There have been many examples of MySpace doing this. Time will tell if this also happens at Facebook or Twitter. And although his page was not repossessed, one Montreal artist had his Facebook page (with 80,000 fans) hijacked by someone, who then spammed his fans. It can take a while for Facebook to sort out situations like that, and it’s a great example of how you can lose control of your social networking page.

2) You Own the Experience -

With your website you also own the experience. You can control what your fans see, when they see it, and the messaging that you send to them. This means:

• No Distractions - Unlike with social networking sites, on your website there are no ads to distract your fans, and there also aren’t dozens of other links vying for their attention. You’re able to really focus on your music and your brand. And since you have your fan’s full attention, you can then direct them to your call to action to deepen their connection.
• No Design Limits - With your own website, you don’t have any design limits or restrictions. If you want to add a blog, or put a hi-res press kit for download, or even a special “fan-only” page, you can. Your website gives you the opportunity to make a deeper connection with your fans, without the limits of the one-size-fits-all social networks.
• A Better Buying Experience - If you sell music or merch, your own website is even more critical. Social networking sales tools force fans to interact within a tiny widget, or redirect them to another website altogether to complete the transaction. Having your own store on your own site allows you to give your fans a seamless buying experience, and full control over what that experience is.

3) You Own your Data -

On your .COM site, you can get far more detail on your fans than what you can get on a social networking site. Stuff like:

• How many people previewed my track last week?
• Which ones downloaded it?
• Did they skip ahead to a specific track?
• Where do those fans live?
• What site brought them here?

More than stats, you also own your fan list. You probably noticed that you can’t move your old MySpace fans to Facebook. That’s because you don’t own that fan list, MySpace does. Same thing could happen whenever the next hot social network appears. There is no easy “export from Facebook” option!

Remember, your list of fan emails is gold. It allows you to always maintain contact with your fans, regardless which social networks they might be on.

This is not to say that you shouldn’t be present on social networks — they clearly have a place to interact with and find new fans. But what’s even more important is to have a home base to bring your fans back to that you own, where they can always find you regardless which social networks are popular at the time.

In an upcoming post I’ll talk about the “hub and spokes” method of driving fans from your social networks (“spokes”) back to your website (“hub”), and list some of the best ways you can do that.