Not long ago, the professional music industry involved a complex but fixed set of players: artists, labels, managers, promoters and the like. Many of these roles have changed, but none have disappeared. They're joined by a new set of participants: tech giants, streaming services, social music startups and, perhaps most crucially, developers.

This weekend, coders and industry representatives gathered in San Francisco for Music Hack Day, a tradition that has spanned continents for the last four years. Like other hack days and hackathons, the event is dedicated to bringing developers together to build new things using the latest technologies and platforms. In this case, the focus is on music, so the toolkit includes everything from mobile hardware and homemade digital instruments to open Web standards and the APIs of services like SoundCloud, Last.fm, Spotify and the Echo Nest.

Noteworthy hacks conjured up in the past have included various software mashups between popular music sites, as well as things like invisible, interactive instruments that can be played in the air or on a surface. Some hacks are strictly Web or software-based, while others involve some tinkering with hardware, including LED lights, Nintendo Wii controllers and Kinects.

The most recent Music Hack Day spawned a total of 62 hacks. The list included a music search engine that queries multiple streaming services, as well as a Theramin made from two iPhones. One app succeeded in predicting Sunday's Grammy winners almost as effectively as Billboard did.

Some creations were simpler, such as a Spotify-based clone of the classic MP3 player WinAmp, a mash-up between iTunes and the Echo Nest's recommendation engine and a SoundCloud plugin for Wordpress.

Hacks ranged from the mind-blowing to the simplistic but useful, dealing with nearly every stage in the creation and consumption of music.

How Music Hack Day Helps the Music Industry Evolve

Music Hack Day was started in 2008 and hasn't stopped growing since. In the tradition of other hacking events, SoundCloud VP of Business Development David Haynes teamed up with experienced hack day organizer James Darling to create a music-specific event. The proliferation of APIs from various music-related platforms plus some of the other disruption going on in the music industry made the space ripe for some creative hacking.

"Weren't sure what to expect from it at first," said SoundCloud cofounder and CTO Eric Wahlforss. "It got off to such a good start that's now become sort of a tradition for the last few years. Music Hack Day is a big part of our culture."

For startups like SoundCloud, events like Music Hack Day yield creations that could one day find themselves integrated with the company's core product. The vast majority, however, will not. And that's okay. The event's value is of a much deeper nature, in that it fosters a developer community around music and brings a wide range of players into the same room, from independent coders to music industry representatives.

A side effect of this type of collaboration is that the entire industry is creeping forward. A few years ago, Wahlforss said, some record labels had no idea what an API was or how it was relevant to their business. Today, EMI has an API of their own. They, along with Universal Music Group, participate in Music Hack Day and are curious about much of the fruit it bears.

"If you speak to the labels today, they're all about API's and mashability of their content," Wahlforss said. "They're very on board with this trend, which is very exciting to see."

For SoundCloud, this spirit of hacking is something that plays a prominent role in the culture of the company and its growing team of developers. Modeled after Google's "20% time," the company encourages employees to use what it calls Hacker Time to experiment and build new things that may or may have any direct bearing on the official product strategy for SoundCloud.

The company also recently hired its first developer evangelist and is silently preparing a major announcement about its platform.

Pushing Music into the Future

SoundCloud isn't the only company pushing the boundaries of what's possible in online music. Innovation is all over the place, from Spotify's new third party app platform to the long and growing list of apps powered by the APIs from services like The Echo Nest, Last.fm, Bandcamp and several dozen others.

The open architecture of the Web, the proliferation of APIs and hacker culture have already made a notable mark on how people create, discover and share music, yet all of this is still very much in its earliest stages.

Twenty years from now, things will look even more different. The industry and ecosystem will move forward together, probably with a few players becoming obsolete along the way. Artists and sound engineers may lead the creative charge, but if what emerges looks and works radically different from what we have today, we'll have developers to thank as well.

Music Hack Day Photo by Thomas Bonte

Last week, rock veteran Neil Young chimed in with his assertion that the digital music files we listen to today are of much lower quality than the original recordings. Speaking at the D: Dive Into Media conference, he said that the technology now exists to deliver much higher-quality audio to music fans, and that he had even talked to Steve Jobs about a possible solution.

How Serious is the Problem? ... And How to Fix It?

Exactly how bad is this problem? By Young's estimation, what we hear in most files today is "only 5% of the data of the original recording". That may be a slight exaggeration, depending on how the files are encoded. Certainly, lower bit rate files (such as 128kbps MP3s) have a noticeably degraded quality to them, compared to a CD. But most sources have graduated to higher quality files now that broadband speeds allow for it. A standard track on iTunes is a 256kbps AAC file and premium Spotify subscribers can listen to many songs at 320kbps, which is about 22% of a CD track's bit rate.

When it comes to streaming audio on mobile devices, the quality buck pretty much stops at whatever the data connection can handle. On 3G networks, streaming CD-quality audio just isn't feasible. Over a good WiFi connection, things look a little more promising, but there are still limitations if the user experience is to be preserved.

Young: We Need an iPod For Audiophiles

So what does Young propose as a solution? From the sound of it, he'd like to see a sort of mega-iPod with more disk space and internal guts optimized to playback massive files. Such a device wouldn't be designed to include one's entire library, but rather only a selection of audiophile-quality albums. Presumably, it would tend to be used with superior quality earphones or speakers, which is another important factor in the quality of what we hear.

Even if a device akin to what Young describes were produced and sold, how big of a market would there be for it? The quality of the audio found on sources like iTunes, Spotify, MOG, Amazon and Google Music is apparently good enough to convince millions of people to pay for access to it. At the end of the day, most of the content on the pay music services is certainly good enough. Musicians and audiophiles can pick up on the degradations in quality, but for the average listener, it's pretty subtle. The device that Young describes would have to be marketed toward the audiophiles for whom 320kbps simply won't cut it.

Last week wasn't the first time Young has criticized the state of digital music. Some may dismiss his stance as nothing more than a grumpy, old-school perspective, as though he's just an old guy that doesn't get the new-fangled ways of the Web and digital media. This isn't the case. Young may be a veteran of the music industry, but he's well aware of what's changed about it and why. During the same interview in which he slammed MP3's, he said that "piracy is the new radio" and encouraged new artists to forgo record labels in favor of doing it themselves.

There's Nothing Wrong With Analog

As Young pointed out, Steve Jobs may have been a digital music pioneer, but "when he went home, he listened to vinyl." This is true not only of the generation that grew up on LPs, but also of a growing number of younger music fans today. Vinyl sales have been surging for the last few years, with 2011 seeing a 39% increase in sales over the previous year. Digital music sales grew last year too, but by considerably less.

For music fans with the deepest concern for audio quality, it seems analog is increasingly the way to go. That's okay. We can have our digital revolution in music and still fall back on analog formats. Just like with books, the value offered by digital music is primarily about volume, convenience and ease of production and distribution. And just like sitting down with a good, paper-bound book, putting on a vinyl record is more about quality and the overall experience.

Digital and Analog Can Coexist Peacefully

Digital and analog don't need to be at war with one another. What many labels and artists are doing now is sell records on vinyl and include a coupon for a free, high-quality digital download in the record's sleeve. That allows people to enjoy the album as it was intended and also throw it onto their iPod or smartphone for listening on the go.

It's also possible to go the high-quality route in a digital-only format. When The Beatles' catalogue was remastered and reissued in 2009, the material was released on CD and, for the first time, via iTunes. For diehard fans who wanted more than what iTunes could offer, they also sold an apple-shaped (no, not that Apple) thumb drive containing every album in superior quality, lossless FLAC format, as well as as 320kbps MP3s.

However things may evolve, it's evident that digital music has brought us great value, but it's done so at a cost, namely quality. This may not be perceived as a problem by every consumer, but for those who take the craft of creating and recording music most seriously, it's one well worth solving. Whether it's solved through a hybrid of analog and digital music consumption or through some new, high-capacity device for playing back lossless digital audio, the challenge isn't an insurmountable one.

Vinyl sales chart courtesy of Digital Music News.

Judge Wood found earlier this year that Limewire had knowingly participated in copyright infringement "on a massive scale" after the RIAA, along with several major record labels, brought suit against the company. And while the RIAA wanted the site shut down then, Limewire was given a reprieve to build a new copyright-friendly technology.

The courts will next decide how much LimeWire will be assessed for the damages it has caused the record industry.

While shutting down LimeWire may be a blow to file-sharers, it seems likely that many LimeWire members will move to a new client rather than ceasing sharing altogether.

According to Ek, the notion of overnight success is "very misleading and actually rather harmful to any hope for long term and sustainable growth in this industry." Despite this fact, he calls out the music industry for doing just that and expecting to see business models proven "within months of inception."  That's just not how it works, he says, reminding us how iTunes was not initially the powerhouse it is today. In its first year, the company missed its revenue targets by 30% and most label executives doubted its staying power at the time.

While Ek realizes that comparing iTunes to Spotify is wrong given the very different business models for each company, it does prove the overall point: success in this industry takes time.

Spotify, which is currently hugely popular in Europe, has yet to launch in the U.S. due to contract negotiations over licensing agreements. However, as popular as the service is, it still has a long way to go in terms of both product and monetization. Ek acknowledges that one thing which needs to be addressed is how difficult it is for Spotify users to actually buy the music they're listening to. Yet despite the fact that nearly 80% of the company's users are unaware that they can purchase the tunes they're hearing, Spotify is still one of the biggest affiliates to music downloads.

Another challenge facing the company is how to earn a profit considering the large costs of licensing the music it plays... especially when reliant on an ad-supported model. (Spotify offers multiple service levels, one being ad-supported. It also offers subscriptions.) Earlier this year, another streaming service, Last.fm, had to do away with its ad-supported model for the same reason.

The Music Industry Needs to Change

If it was up to Spotify, the music industry would be embracing the future instead of constantly fighting against it. Ek says that in order for the industry to find success, it needs to realize that the new business model is "a mix between ad-supported music, downloads, subscriptions, merchandising and ticketing where the user comes first and where the key to monetization comes from portability and packaging access rights." If willing to adapt, the music industry could then have the potential to become a $40-50 billion industry and one that could grow stronger than it ever was.

Until that time, it looks like Spotify has a long road ahead of it, but it's good to know that it is up for the challenge. "We aren't interested in just trying to hype the company and then flipping it," Ek says. "We are in this for the long haul."

Not so many years ago, consumers had little choice when it came to buying new music. If you fell in love with a favorite song from an artist or band, you bought the CD. Singles had already been phased out for the most part, so the choice was either to buy the CD or nothing at all. For this reason, artists were able to make oodles of cash even when they were only a one or two-hit wonder. Yet somehow, the music industry is convinced that people actually bought CDs for all the nifty content contained in the included booklets. With the iTunes LP, they're reinventing that booklet for the digital age and packing it full of media like lyrics, liner notes, album art, photos, and even videos - that last one being something that you certainly couldn't cram into the CD case in days past. With this digitally enhanced LP, labels hope consumers will once again buy complete albums, not just individual songs.

Unfortunately, this "interactive" album of the future, meant to rev up album sales, is a sad, uninspired effort which tries to cram the old business model of the past down the throat of today's new digital platform. While the extras are nice to have, the iTunes LP doesn't offer anything more than what fan sites do, as we noted yesterday in our critical analysis of Apple's new offerings. And unlike fan sites, which evolve and change over time, the LP is a static offering that doesn't take advantage of the platform it lives on - an internet-connected digital music player.

Forget the Album, Buy an App

Meanwhile, as record labels scramble to save themselves with this new format (and possibly even one of their own dubbed "CMX"), some artists are starting to figure out the formula for success in this new era of single-track purchases and app-laden phones...and it's not an album. A handful of forward-thinkers have come up with a way to offer true interactive content to fans, which in turn, encourages fans to purchase more of the artist's music. The answer? The iPhone app.

Instead of trying to reinvent the wheel, these music-themed apps are innovative new ways for fans to interact with content produced by their favorite artists. For example, Nine Inch Nails released a multimedia application earlier this year where fans can access a mobile version of the fan site nin.com, interact with other fans through location-based chat and photo sharing, stream tracks and exclusive playlists, download wallpapers, and much more. Although the app is free in the iTunes app store, the side effect of having more engaged fans means having more people interested in buying the band's music. NIN, headed by front man Trent Reznor, is no stranger to this sort of out-of-the-box thinking. He has experimented with a number of ways to make rockstar-worthy income in this digital age, including last year's introduction of a creative multi-level pricing scheme for albums where consumers could download tracks that ranged anywhere from completely free all the way up to a $300 premium package. Within three days, that experiment grossed $750,000 in sales. Not a bad way to sell an album.

But Reznor isn't the only artist with an app these days. American DJ and singer-songwriter Moby has also just released an official app created by social music service iLike which offers similar functionality. Besides providing access to exclusive content, fans can interact with each other through Facebook and iLike and they can post photos directly from the app to the Moby fan community. However, unlike NIN's offering, this app isn't free. It currently sells for $1.99. Whether or not this particular money-making gambit will work, though, is still to be determined. The app is only a couple of days old at this point so it's unknown whether fans will pay.

While apps like those described above essentially provide mobilized fan communities, hip hop artist Soulja Boy went a different route earlier this summer. Using a new app platform called Romplr, his $2.99 application, "Soulja Boy Tell 'Em," lets fans remix the artist's tracks and share them with friends via email, Facebook, or via www.romplr.com. In many ways, this app represents the best use of today's digital platform by allowing for true interactivity with the music. In fact, the press release about the launch even claimed "the next wave of fan and band interaction is going to be through the iPhone." Perhaps it will be the future of music sales, too.

The trend of artists with apps shows no signs of slowing down. Just today, popular R&B artist Usher launched his own app, too, "Usher's Top 100." This app, basically a streaming radio station of Usher's favorite tunes, will appeal to fans who want to know what music has inspired the five-time Grammy award winning star. It, like Soulja Boy's app, is not free either. The price is $2.99. Again, it's too soon to tell how well it will sell.

Only the Beginning

Although this is only a handful of examples of the new ways artists are using the mobile platform to interact with fans, all of these methods are arguably more inspired than the iTunes LP digital album. Instead of thinking that the old way of doing things can simply be tweaked for the new economy, these artists are developing compelling interactions which will either be direct sources of income as paid applications or will indirectly encourage sales through a more engaged fan base. While it's too soon to tell how much extra income these apps will add to the bottom line, if we had to bet on anything that could potentially "save" the music industry, we wouldn't put our money on the LP. It looks like the future is apps, not albums.

We first looked at the Republic Project in February this year, when it was still in closed beta with only a handful of artists, including Tim Myers, Dexter Freebish, Steriogram, and Still Time. During the beta period, the service provided a lot of help to these bands, but now that the site will be open to all bands, this amount of hand-holding won't scale and bands will have to use the project's self-service tools to manage their accounts. Bands will get a widget that they can put on their site or MySpace page to bring fans to their Republic Project site. On the service, they will be able to upload new videos, track orders, and set the price for their albums and a release date.

When we talked to Republic Project CEO Ryan Swagar yesterday, he stressed that the project is now open for everybody, no matter the size of their fan base or style of music. Bands can set the price for their albums anywhere from $2.99 to $9.99. All of this money will go directly to the band. In addition, the Republic Project will charge fans a fixed $1.99 transaction fee. Swagar also noted that bands don't have to produce full albums but could also use the service while they're in the studio to record just a few songs.

Focus on Video

Of course, bands are free to upload as much or as little content during the pre-release phase as they want, though to make the best use of the service, we would expect bands to update their fans at least once every couple of days. The Republic Project will hold all the money it collects from fans in escrow, just in case a band never actually finishes an album.

Once an album is finished and all the music is uploaded to the service, the band flips a switch and the finished music goes out to all the fans. At the same time, though, the band's site on the service will shut down and the band can sell its final product anywhere else as well. The service does not plan to become a full-blown music retailer and won't sell any of the tracks after the album is finished.

From what we have seen so far, we think the Republic Project looks like a great idea that is very well executed. We are also not aware of any other company that currently provides these services. The Republic Project fills a niche for both musicians and bands and it will be exciting to watch how bands use the service over the next couple of months.

As the New York Times reports, John Simson, the executive director of SoundExchange, still argues that the original rates would have been "appropriate and fair," but he admits that these new rates will give "webcasters the opportunity to flesh out various business models and the creators of music the opportunity to share in the success their recordings generate."

Tim Westgren, Pandora's founder, points out that this is not an ideal solution, but that this deal "still represents a thoughtful and reasoned outcome under the circumstances."

Some Changes for Pandora

At least for Pandora, however, this will also mean that a small number of users who stream more than 40 hours of music per month will have to pay 0.99$ if they want to hear more music on Pandora during that month. Pandora says this will only affect about 10% of its user base and those users, of course, could also upgrade to Pandora's desktop player, Pandora One.

Until yesterday, for example, users could just re-download songs they purchased from the service (quite useful when your hard drive or MP3 player dies on you). Now, however, most likely in order to combat fraud, eMusic has put some restrictions on the number of downloads it permits per song.

Also, while even long tracks (often in the classical or electronic music section) used to cost just one credit (users get a certain amount of credits per month, depending on their subscription plan), a lot of albums now cost 12 credits even when they only feature four or five tracks. The 12 credit idea was actually sold as a positive by eMusic, as it would allow users to download any album without having to pay more than 12 credits. That's great for albums with lots of short tracks, but now, for a lot of users, this actually brings down the value of their subscriptions and raises prices significantly.

There is also some inconsistency here, as some albums don't yet feature the 12-credit price. According to eMusic, only about 50% of all albums have transitioned to album pricing so far.

Some songs are now also only available when users purchase a complete album, whereas before, any songs could be downloaded individually.

The Good

Of course, there are also some positive aspects to the new eMusic. A new feature, for example, now shows users which tracks from an album they have downloaded before and allows them to complete this album.

EMusic also still offers all of its tracks as DRM-free MP3s, and some albums are now a real bargain, as you can often get albums with far more than 12 tracks for only 12 credits, and while taste is obviously debatable, we have to admit that there is also some interesting music in Sony's catalog.

Is the Customer Still King at EMusic?

Where eMusic failed though, even though we have to acknowledge that it tried to communicate with its customers, is in preparing its users for these changes by being completely transparent about the updates. It's no secret that most users don't like change, and while there is a lot of talk on the eMusic forums about unsubscribing from the service, we will have to see how eMusic's subscriber stats develop in the next few months. While some of eMusic's loyal subscribers might indeed leave, having the Sony catalog in its repertoire might actually attract quite a few new users as well.

Update: Matt Graves, imeem's VP of marketing and communications, left a comment below. Comments on the imeem blog post are now open, VIP subscribers will be able to get a refund.

The original post continues below:

Unhappy Users and VIPs

It's not surprising, however, that imeem's users are quite vocal about their dissatisfaction with the service's decision to delete the photo and video collections that many have poured quite a few hours of work into over the years. A lot of users are especially outraged by this because they specifically subscribed to imeem's VIP service in order to upload more of their own videos and photos. It's also noteworthy that imeem isn't giving users an easy way to download their content from the site. While users could right-click on every picture and save it to their desktop, there is currently no way to download videos from the site.

Not Handled Well

Overall, we would have to side with imeem's users and it doesn't look like the company is handling this current affair very well. Comments on the blog post are closed, nobody from imeem's staff (as far as we can see) is interacting with customers on imeem's forums, and the service isn't giving paying customers a chance to get a refund. imeem, of course, is under some pressure to make a profit at some point, and the service's relationship with the music industry has been rather rocky lately, but this decision to give users only five days of warning before deleting their content on the site just feels like a textbook case for how not to manage your user community.

Perhaps most successful is University of Ottawa professor, Michael Geist's, outspoken stance against the introduction of the Canadian DMCA (Digital Millennium Copyright Act). A little over a year ago, Geist launched his Fair Copyright for Canada Facebook Group in the hopes of educating the public about a bill he saw as a "sell out to American pressure". Geist believed that Bill C-60 would have effectively duplicated American copyright legislation and created an unfair imbalance between copyright holders and general consumers. Thousands of Canadians agreed and the Fair Copyright Facebook group gained widespread popularity.

On the day the DMCA was to be voted upon, the Facebook group had more than 25,000 members and Federal Industry Minister Jim Prentice dissolved the legislation in favor of further analysis. While there was no admittance from the Minister that online resistance was the reason, Industry opposition Charlie Angus exclaimed, "They tabled the bill this morning, now 3 hours later he tells me they've got cold feet? Did they just discover Facebook this morning?"

Whether Canadians like it or not, Facebook has changed the landscape of Canadian politics. Geist's Fair Copyright for Canada group currently has more than 89,000 members, and he was named the Electronic Frontier Foundation's Pioneer of 2008. Meanwhile, the Conservative government has promised to reintroduce the DMCA, but no date has been set in legislature. For more on the Geist and the Facebook group, check out the coverage on CBC's The Hour.

First, MySpace is taking the unorthodox move of giving applications some access to their PR department. MySpace announced on Monday that it is looking for a few good apps with whom to put out joint press releases. This is undoubtedly a good move for MySpace PR because it allows them to create a more continuous buzz about the platform. But like the platform itself, sharing the stage with app developers is a surprising shift from old policies for the News Corporation-owned social network.

This is, after all, the same News Corp. whose President and COO Peter Chernin said in 2006, by way of introducing plans for MySpace to compete with many of the companies that had helped it grow, "If you look at virtually any Web 2.0 application, whether its YouTube, whether it’s Flicker, whether it’s Photobucket or any of the next-generation Web applications, almost all of them are really driven off the back of MySpace."

It's the same Fox Interactive Media (the arm of News Corp. that controls MySpace) whose Chief Revenue Officer Michael Barrett said last year, "We probably should have stopped YouTube. YouTube wouldn’t exist if it wasn’t for MySpace. We’ve created companies on our back."

And it's the same MySpace that famously blocked widgets (such as YouTube and Photobucket -- the latter of whom it eventually bought) that competed with products of its own.

But a lot has changed in the past year. Not only has MySpace embraced the idea of an application ecosystem and launched a developer platform, but they also announced plans in January to create a startup incubator. Is it too little, too late, though? Will MySpace's platform be as successful as Facebook's has been?

Apps in the News Feed ... Er, Friend Subscriptions

Yesterday, MySpace also announced that it would begin pushing notifications of app installations to its Friend Subscriptions -- their equivalent of the Facebook News Feed.

Interestingly, while MySpace is just rolling out this feature, Facebook has recently begun to impose restrictions on how applications interact with the News Feed in an effort to combat information overload and growing noise. It will be interesting to see if MySpace repeats the same mistakes Facebook has made, or learns from them and implements tighter restrictions on it Friend Subscriptions from the start.