A recent wired news article shows us a great example of the future of music promotion. Wilco was dropped by their record label (Warner) which forced the band to use the web as a main source of promotion. They were successful.
Income is barely existent for new musicians, most of which is generated from touring and merchandise sales. Initially, they are in need of publicity -- a process of touring, in-store promotions, merchandise, CD sales at gigs, radio, etc. Name recognition usually comes slowly, but it's a different story when they use the internet as a promotional tool.
A band website allows fans to listen or download music with ease, spreading their songs like wildfire, and eventually creating more revenue from ticket, merchandise and album sales. After a boost in fan base, options are to create a small label, use a distribution company without the labels help or in Wilco's situation, wait for a call from the big labels.
"Music is different" from other intellectual property. Not Karl Marx different - this isn't latent communism. But neither is it just "a piece of plastic or a loaf of bread." The artist controls just part of the music-making process; the audience adds the rest. Fans' imagination makes it real. Their participation makes it live. "We are just troubadours," Tweedy told me. "The audience is our collaborator. We should be encouraging their collaboration, not treating them like thieves."
It seems inevitable that a compromise will have to be established between big labels and musicians. The labels continue to refuse the new media tools, and the musicians have always resented the amount of control in the hands of big labels. Wilco has been successful promoting themselves on the web, expect to notice more bands taking the same route.Link