File sharing, and the emerging social economy

First musicians were anti recordings due to profit loss in live music, now they're mad at pirates for profit loss in recordings but renewed value in live music. Irony?

I recently came across this simple description of the music industry:

1. Music Production is Expensive
2. Music Distribution is Really Expensive
3. Marketing is Really Really Expensive
4. Create a Business that does 1, 2, and 3.
5. Profit!

To me, this seems like a pretty reasonable simplification, and I think it makes the problem very clear. Number 1 and 2 are no longer true, and number 3 is not neccessarily as expensive as it used to be. The internet is changing the world, and some businesses are bound to become redundant.

I definitely believe that the music industry will be very different in the future, with more focus on small independent bands and artists, all connected in a giant "Web 2.0" kind of way, rather than trough huge corporations. We're already seeing examples of this, when artists produce their music with open source software, distributes it themselves trough torrent technology, and gains fans trough viral marketing.

The only thing this new model is really missing, is an equally effective way of earning revenue. Advertisement is always an option, but I'm both hoping for and expecting some form of tip-system to be developed and socially embraced over the next few years. Something like Tipit for instance, but more universally integrated and with a slightly more streamlined transaction process.

Future artists, bands, groups, causes and other dearly beloved and admired, would be recieving support and appreciation directly, as small sums of money from thousands of people from all over the world, whenever people feel like they deserve it. It's an economy where everybody shares, and if they are really talented, they recieve more than what they give.