Josh Bruno

Google’s CIO Douglas Merrill and Yahoo’s Music VP Ian Rogers announced their resignations Wednesday. They are both leaving for CEO / President positions in the music label industry.

This caught my attention because both Merrill and Rodgers are influential in the industry, but they have chosen opposite paths. Merril’s EMI Group is the 4th largest record company with a traditional business model while Rodger’s Topspin Media is a startup that caters to independent artists. The music industry has yet to find its feet in the digital age.

Because music files can be copied and distributed with ease (the old Napster, and now Bittorrent), it is hard to generate sales. Large Record companies are switching to a pay-per-download system, but are struggling with Digital Rights Management. Smaller companies are embracing the connectivity of the internet and using it to spread the news of small bands. These companies generate revenue on ads or the popularity of their network. For example, Bebo.com recently sold for $850 million. However, the problem with this model is that these small bands do not get a share of the royalties.

I’d like to see a company take a hybrid approach. Promote your big stars with your label. After all, where would we be without 50-Cent or Brittney Spears? Then use social networking to let your users simultaneously generate ad revenue and discover your next big stars. Once an artist is popular on your social network, bump him up to rock star status and start charging for downloads. As of now, the only companies capable of such a thing seem to be afraid of the connectivity of the internet. If only I had a few big-name rappers, $50 million, and some spare time…