Sorry, this is going to be a long post, I'm quite tired when writing this, sorry for any typos, will clean up text later.
This is a tricky problem, my opinion is that the major labels let the whole industry down (and especially the artists). Looking at it from my viewpoint, they had countless chances to embrace the Internet as the future of distribution, but at first they pretended it didn't exist, then they sued anyone bold enough to prove what could be done with it. MP3s first appeared on the Internet in 1994, Napster appeared in 1999, the iTunes music store didn't open in the USA until 2003!!! It took a computer company to show everyone how it should be done. Technically an iTunes store style service was possible in 1994.
Then they tried suing the file sharers themselves, I still remember the RIAA debacle of children and grandparents being summonsed to answer claims of illegal file sharing. Not forgetting that Sony put a trojan horse (XCP-Aurora) on a lot of their CDs for a while, and various labels deliberately pressed defective CDs to stop them being read on a computer. The music industry did a great job of alienating their customers. :(
Then there is the perceived value of music, which in part has has been eroded by labels doing deals with newspapers to give away free CDs, it was especially heartbreaking for me personally to see the Mail On Sunday giving away Tubular Bells a few years back (my late father cut the original vinyl master of it).
And it feels like shows such as The X-Factor are treating the public audition process as a modern day freak show for audience entertainment.
So, that brings us to today. In a lot of ways I am more positive about the music industry than ever, artists have more power than ever before, the days of sending demos to every label in the hope of getting signed are pretty much gone, but it's now possible to record,release and distribute an album without having to be signed to a label.
But, as you have shown, this is not without its problems.
Peer to Peer
Illegal file sharing (or copyright infringement if you prefer) is still a major problem, but from my perspective as a former technical manager for an ADSL ISP, I don't think it's stoppable. At best it's a game of whack-a-mole, as you block one peer to peer network, someone creates a new one. Some services you can't feasibly block, BitTorrent is used for a lot of legitimate purposes for instance. Blocking access to illegal files isn't practical either, P2P is a very different animal to HTTP, a cleanfeed style system would be largely ineffective for P2P, the government haven't realised this yet, but I suspect they will soon enough.
Even if you do manage to block it, all someone has to do to get around it is to connect to an anonymous encrypted network such as TOR, then they wouldn't even be traceable.
So, you can't really stop it, so that leaves 5 alternatives as far as I can see.
1. Do nothing and ignore P2P.
2. Make legal music purchases significantly more attractive than illegal downloads.
3. Make people understand how much artists need their support.
4. Mould P2P into a system for promoting new music and artists. (think of it as the new radio, but better)
5. Tax broadband connections to reimburse artists, maybe handled in a similar way to royalty payments for radio play are handled.
My feeling is that a combination of the last 4 options could work - as much as we want it to, it looks like P2P isn't going away.
Spotify
I think Spotify is a great service, I've even used it a few times to introduce people to new artists, but the big problem is that the royalty payment for independent artists is terrible. :( I could be mistaken, but I've read that the major labels get much better rates for each play and even get an advance. This needs to be addressed soon, independent artists should receive the same treatment as major label artists.
For independent artists it's barely better than P2P at the moment.
Live
This should be where the majority of the money comes from, but as you've proven, it doesn't always work that way. It seems like a lot of artists are getting a raw deal, we need better promoters, venues and much fairer payouts for artists. It doesn't help that so many live music venues and pubs have closed down.
There needs to be a new bread of live music venues. In fact, I'd go as far as to say that someone needs to create an "Apple Retail Store" style chain of combined music stores and live music venues. It's getting hard to buy music on the high street now, HMV are next to useless and the supermarkets only stock chart stuff. I'd love to see a music store that sells the best in new music, gives priority to independent artists and puts on live music every evening. Rough Trade East would probably be the nearest equivalent at the moment.
In a related point, sometimes people will pay a premium for unique gig experiences, for instance, your album pre-launch intimate acoustic gig was really special. I'd happy pay extra for special gigs of that calibre.
Promotion
This is one of the biggest problems that I can see an independent artist having, although social media has made things easier, It's still difficult for independent bands to find new fans.
Myspace isn't much use anymore, Facebook and Twitter are still useful, but they're better for keeping in touch with existing fans.
There is very little music on mainstream TV these days, Jools Holland is one of the few programmes, but even that seems to have lost its way a bit recently. I'd love to see someone create a web based new independent music show with very high production values, maybe like Top Of The Pops crossed with Later.
The question is,
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