Tim Lee links an essay on the fretting over the “business model” for music distribution online when so much content is being given away free:

This is your worst nightmare. People who can follow their dream on sweat equity. Who with their computer and the money from their day job or mommy and daddy can compete with you. It’s like the North Vietnamese, all our military might couldn’t defeat individuals who would fight to the death. Same deal in Iraq.

It’s an eye-opener. That your model is IRRELEVANT!

YOU need to pay the mortgage. YOU need to go on vacation to the Caribbean. But the new musicians? They’re willing to sleep on the floor and eat ramen. Hell, they’re in their twenties, they’re not on the corporate track, they’ve got different ambitions!

This is perhaps, slightly romanticized, as there’s a limited window of most of our lives during which we’re willing or able to sleep on floors eating ramen. And the idea of a shift from music sale as a primary revenue source to music distribution as a promo for live performance is certainly not just something Napster apologists invented out of whole cloth: There are plenty of times I’ve ended up going to see a band I’d never heard of at a local venue because I noticed they were playing, found some free songs online, and decided I liked them enough to drop a few bucks on a ticket. (The excellent Maritime, for instance.)

The real point to emphasize here, I think, is that it has always been the case that the majority of young people making music or painting or writing stories or what have you start out doing it because they love the creative act, without any clear prospects of making money off it. For every band that ends up signed to a label, there are dozens who play a few shows at local bars, maybe cut a demo in someone’s garage, and then are never heard from again. We like to think that the ones with real talent and vision are usually “discovered” and gain a wider audience, but who knows. Maybe a decade ago there were some kids doing fantastic experimental indie rock in Dubuque who never found the broad and appreciative audience that might have persuaded them to keep making music. And as Ygz points out, “not having a business model” at the individual level doesn’t necessarily mean a business model won’t find you. A slightly less romanticized version of the point above might read something like this: If people are increasingly downloading music to play on their iPods rather than buying CDs anyway, and if a lot of the production that used to require a professional studio can be done on a $1,000 laptop with a $200 software package, a ton of the overhead previously associated with making and disseminating an album goes poof, and so even artists who aren’t ecstatic about the whole ramen plan don’t need to generate anything remotely like the same amount of gross revenue to pull in a decent income from people who decide to buy the whole album (or a T-shirt, or a concert ticket) even when half of it can be downloaded free.

One way to think about online distribution is as changing the shape of the expected-value lottery from the perspective of the aspiring musician. A kind of caricature of the old model might look something like this: You’ve got a large probability of either never catching on, or perhaps breaking even and covering your production costs, a small probability of enjoying some moderate success, and a tiny probability of hitting the jackpot and becoming a massive cash cow. So the economic component of someone’s decision of whether to devote time and resources to making and distributing music consists of a lottery over those outcomes. And indeed, one way of thinking of the function of music labels is to see them not just as firms that coordinate production, distribution, and marketing, but as a species of hedge fund or insurance pool: They’ll sign a diverse portfolio of nascent artists in the hopes that some small percentage will become superstars, thereby absorbing risk that might be too high for artists acting individually. Online distribution smooths out the curve: The jackpot payoff is smaller, but the probability of at least being able to cover your costs for a release is higher. Which, depending on a person’s risk profile, may well be more appealing