I’d argue that both of these very smart guys are obsessed with the wrong problem and, on this topic at least, they are as stuck in the past as major labels are.

They both make the mistake of focusing primarily on start-up business models that revolve almost exclusively on getting publishing or performance rights to stream or download music. And by getting tangled up in that mess, they miss the forest for the trees.  They’ve forgotten that the music industry isn’t — and has never been — just about recorded music.  Sure that part is hard and it’s been shrinking for the last decade, but that aspect is only a part of the bigger picture.

Don’t believe me?  Here are some forward-thinking companies who are wisely focusing on other parts of the music world and not just whining about the high cost of licensing music. So what are they doing right?

They focus on live music

Live music revenues have eclipsed recorded music revenues and while a lot of that money is flowing through LiveNation or AEG, both of those companies are ripe for disruption. Live experiences are hard to pirate and commoditize. As the money drained out of recorded music sales, money spend on music has moved products and services that are harder to mass produce and offer intimate access to their favorite musicians.  And fans are willing to pay for these experiences, in stark contrast to the smaller segment who are willing to paying for downloads or subscription music services.

This is what start-ups like SongKick and BandsInTown understand as they build communities and tools for live music.

They are making promotion and discovery better for artists

The truth is that 90 percent of musicians don’t have a piracy problem, they have an obscurity problem. The people who should love their music just don’t know it exists. The old channels of videos and radio are still there, but the internet exploded everything and diffused attention. In many ways it’s harder than ever for artists and fans to connect. While Peter scoffs at the value of a start-up based on bands without music contracts, it’s where the future Radioheads and Beyonces are going to come from. And plenty of new and old artists who DO have label deals also need these services and will pay for them.

This is what Soundcloud (CEO Alex Ljung pictured) is doing by proving easy-to-use tools for artists who want their music to be heard by more people in more places. Or WebDoc, which creates a platform for artists and their fans to collaborate and share creative projects.  Or The Hype Machine, which has harnessed the power of music blogs to amplify discovery of new music. This is also the area that my old company, Last.fm, SHOULD be pivoting toward…but don’t get me started on that.

The opportunity to partner with brands here is also amazing. It’s also a place where you can get the labels to work with you instead of sending their shark-like lawyers to negotiate with you.

They are making the whole ecosystem better

The value of music for fans isn’t just listening to it.  It’s about the connections you make with other fans and to the artists themselves. Or by disrupting the number of middlemen who take a part of each dollar an artist gets from fans. Fans want to pay artists, particularly when they understand that the artist gets a larger piece of the pie than they did with the old-school record labels.

This is what Ian Rogers has been preaching forever as TopSpin pioneered the direct-to-fan platform. Or what Benji Rogers is doing with his alternative funding platform for artists, PledgeMusic. Or what Bandcamp does when they create a better deal for artists by letting them sell direct to fans.

They created simpler and more intimate services

While the first generation of services that Pakman and his generation ran were based on the size of the catalogs they offered and on trying to be all things to all users, a music services doesn’t have to be massive and complicated to be valuable.   This is what Hannah Donovan and Matt Ogle, formerly at Last.fm, are doing with This Is My Jam, which you an think of as Instagram for music. Watch them closely.

They move their focus to mobile

Mobile phones are already the most personal technology we own these and so they have already become central to many people’s music listing experiences. The opportunities to expand that to other music-centric features like with ticketing, new music discovery, fan/artist interactions are all fantastic. Location and hyper-local services around music are also untapped. Improving and enhancing music playback of music we already own is also under-developed as an opportunity.  Apps have become a new medium for artists like Bjork and Brian Eno and there is more room for innovation here, even as it gets even more crowded.

This is what Mobile Roadie recognizes as they build a mobile-first platform for artists who want to want to reach their fans directly.

They build B2B services around the music

Every label and artist manager, large and small, is struggling to understand audiences and to collect data around how music is being used. And it’s not just labels who want this data. Brands and advertisers want it too. This is where Next Big Sound and MusicMetric live, providing important analytics and tools to create “actionable intelligence” in the fragmented music world.  The Echonest, meanwhile, is also building data-driven services and commercial APIs to help small and big companies to make their music products with data, play listing, and recommendations.

And that’s not all

Here are other areas that haven’t really been touched yet:

Sync rights

 - the licensing of music to TV, games, advertising and film  is one of the most lucrative parts of the recorded music business.  Creating a better marketplace for sync rights could make it even more valuable, particularly if you can make it faster and simpler for companies to do it.

Merchandising

 The company that really fixes the “merch-table” for bands and creates the Threadless or the

Etsy

 for music fans could clean-up.  TopSpin and BandCamp are doing this now too.

Royalties and payments to artists

  The accounting system that underlies the publishing and performance rights is one of the most rotten and complicated things about the industry. It’s only getting worse as are more digital products and services are created. A few companies like

Kobalt Music

are trying to start again from scratch.  A music start-up built on transparency, great analytics and paying artists faster and more fairly would be the most disruptive music business ever.

Start-ups create the most value when they carve out new business models and transform the way we used to do things.  They are less valuable (and thus less viable) when they just wringing the last drop of money out of old models.  The truly great ones transform industries and build new opportunities, growing the market for everyone.

Kafka and Pakman are right about one thing:  trying to licensing music is hard and the corpses of many start-ups litter are littering the battlefield.  So be smart and don’t play on that field.  Move to a new one or make your own field.

Matthew Hawn is product development and strategy consultant based in London, and previously VP of product at Last.fm

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I noticed an interesting trend at the MusicTech Summit in San Francisco this week: A lot of the talk over lunch and during hallway conversations wasn’t about the next big thing, about fancy Spotify apps or sexy mashups. Instead, people were busy talking about CRMs, CMS platforms and e-commerce.

Some of the companies that I ran across at the event included Official.fm, which helps artists to manage, publish and track their music online; Bandzoogle, which powers websites for musicians; and Cash Music, which wants to become a kind of WordPress-like open source CMS for bands. There was also lots of talk about licensing solutions, e-commerce apps and platforms that help bands to establish a more direct connection to their fans. You know, the nuts and bolts stuff. Much of it wouldn’t really be a very exciting story to tell on its own. But to me, it seemed like there was something bigger going on here.

To learn more, I sat down with Ian Rogers, who may be the perfect example for this new B2B focus. In a former life, Rogers managed the Beastie Boys. He went on to work for Nullsoft, the software company whose Winamp player was a key player in enabling the MP3 revolution. Rogers also worked as a GM of Yahoo Music some years back. He left the company in 2008 to start Topspin, which does marketing and retail for bands like Linkin Park and Sigur Rós and a whole bunch of other acts, many of which you’ll immediately recognize. If you ever see a band selling its T-Shirts on YouTube, chances are that those transactions are powered by Topspin.

Rogers told me that he decided to go into this space because of a huge untapped opportunity. “30,000 to 50,000 artists are making a living in the world,” he said, adding: “But there are millions of people who shop at Guitar Center.” Opening your very own online store may have seemed like a waste of time for the average bedroom musician just a few years ago, but then something interesting happened. A combination of online video and social media opened up new avenues to find a fan base around the world without investing a dime in traditional promotion. That’s huge, because it removed a key bottleneck: “Now you have people building businesses without radio,” explained Rogers.

Of course, an audience alone doesn’t guarantee that you can make a living, and new research from the Future of Music Coalition that was unveiled at the event showed that the majority of artists never see any money from services like Spotify. So is it really sustainable if every singer with a few thousand fans on YouTube wants to be a working musician? Rogers countered my question by asking: “Has it ever been sustainable?”

The good news is that there are more and more success stories, like the one of Nataly Dawn, who found fame on YouTube as part of the indie duo Pomplamoose. Dawn recently turned to Kickstarter to finance her solo album. She asked her fans for $20,000 – and got more than $100,000 instead. Dawn is not alone, but only one example for a new generation of bedroom musicians who use the Internet to connect with their audience. As they become more successful, these artists are starting to look for tools that help them make a living with music. That’s much less flashy than any story about disruptive streaming services, piracy or major labels clashing with their artists. But for music lovers, it points to a very exciting future.

Image courtesy (CC-BY-SA) of Flickr user quinn.anya.

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I like this video because it is simple — it promises to show you a cat elevator and it delivers. A note for people watching at home: dangling a basket out your window is not guaranteed to lure a cute fluffy kitty into your house. Not that I’ve tried or anything.

Lest anyone accuse me of being cat-biased, here is a noble act of dog heroism — one puppy pulling another off a dangerous highway, caught by a traffic camera.

And sure, this is from last week, but who could get sick of watching kittens attempt to defy the gravity of a slide?

Really, with all the worry and angst of the season, it’s little surprise that most people are starting to feel like the archetypal bitter old cat lady. Fortunately, the Internet allows us to indulge that feeling vicariously. Which is ultimately for the best. Have you seen how much cat food costs these days?

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So why are VCs all hot and heavy about this company? The shift to downloading music has boiled away the fat in the industry. Now all you need is an artist, a recording studio and an audience willing to pay for the artist’s music. But someone still needs to handle the marketing and distribution of that music across the web. That’s where Topspin comes in: The company is creating an enterprise-class software platform to track, analyze and monitor music sales and fan response.

As Hypebot, an influential music industry blog notes, “Topspin appears to be breaking through the clutter of disjointed widgets and apps.” And that makes selling easier.

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