Just press play? (How the marketplace is forcing the music business to consider on-demand music.)

Mark Cuban notes in an e-mail to Nancy Baym that if YouTube had sprouted up two or three years earlier, the RIAA would have toasted them for s’mores in a heartbeat. (Those are my words, not his, because it’s getting close to dinner time on the east coast.) If YouTube is considered Web 2.0, let me share some firsthand experience of how it went down during Web 1.0, so we can marvel at how different things are today.

Flashback: Seven (or was it eight?) years ago, I was part of a team tasked to get a popular public radio station to stream online. Streaming was still very, very new, and most of it sounded like a drive-in theatre speaker bobbing in a swimming pool. Most commercial stations were just not ready to make the leap.

However, public radio stations had incentive to go online. By expanding a streaming audience, they could expand their donor pools. Suddenly, stations in distinct regions were head-to-head competitors. (It made life a little more interesting — and occasionally uncomfortable — for anyone who worked at WXPN, WNCW, WFUV, KCRW, and KEXP back in the day.) As it looked at the time, folks could get as creative as they wanted with radio shows, and audiences would vote with their pocketbooks. Stations started archiving shows online and offering multichannel streams based around popular hosts and formats. It was something to behold.

Then, the record companies showed up.

Concerned that folks would sit at home and tape hours and hours of streaming radio for their archives, the record business grasped that someone could chop these broadcasts apart and share them, or sell them. They weren’t being unjustly paranoid — two shows I worked on are still circulating heavily among tape traders. While sound quality at the time was just above the level of “See and Say,” some industry folks knew that someday we’d be listening to crystal clear streaming radio stations, and that they needed to close the door before that day arrived.

First, they banded together with performing rights organizations to set “webcasting rates” and guidelines for online music. Specifically, you can not offer a listener the ability to choose a specific song to play. That meant you could no longer offer archives of shows along with copies of playlists. The result was that audiences felt that the stations were the ones being listener-unfriendly, not the labels (or artists, for that matter).

Next, they got some concessions in the Digital Millennium Copyright Act to make it challenging for folks to grab songs from radio stations. You can no longer play more than three songs from an album in a three hour period on an online stream, nor can you play more than two songs back to back or more than four songs from a compilation CD. Live performances, if you got an artist to sign the right set of waivers and contracts, you could play like crazy. (Which assured plenty of job security for recording engineers at radio stations.)

It sucked, but the cost to license music for online streaming was so high, only established stations (or well-funded startups) could afford to play. The penalty for noncompliance was losing the ability to play an entire label’s catalog, so stations had to play by the rules.

Flash forward to today: YouTube lets anybody upload anything, and seeks forgiveness rather than permission. Labels no longer have a centralized group that they can put pressure on. If a hundred Avril Lavigne fans post one of her songs to YouTube or MySpace without authorization, it takes a battery of record company interns to track them down and stop them — by which time, a hundred more have sprouted.

Fans don’t understand or care about the status quo established by record companies and performing rights organizations. They have simply learned a new way to share what they love with their friends — and they move faster than corporations. Even if Universal sues YouTube out of existence, a dozen other startups are ready to hop into their place. And, by the time another seven years have rolled by, the kids will have figured out how to post videos from their own offshore servers, anyway.

As artists, it’s up to you to choose:

Embrace your fans, free your music, and let thousands of flowers bloom. You can reap your rewards through ticket sales and merchandise. Or, treat your fans like weeds, stomp on them, and wonder why nobody wants to wear your t-shirts anymore.

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