Power to the people: Nettwerk's mission to change the music industry

In the 22 years since Terry McBride co-founded Nettwerk Productions in his flat in Vancouver, the company has blossomed far beyond being a mere independent record label. With offices in London and across the US, the Nettwerk group now spans Nettwerk Management, with clients including Avril Lavigne, Dido, Barenaked Ladies and Sarah McLachlan, the multimedia company Nettmedia, a movie company (Nettfilms), music publishing and graphic design companies, and a soundtrack arm called Unforscene Music.

Having done time in everything from tour management and legal affairs to marketing and radio promotion, McBride has assembled his own vision of how the business ought to work in the new era of digital distribution and instant information. He's calling time on the traditional model whereby the artist was an indentured serf of the record company, not even owning their own recordings. "The music industry went from being a partner and went into the loan-sharking business," he suggests. "In essence they said to artists 'I'll give you the money to buy your house and when you've paid it off I own the house'. In almost any other business it's illegal."

McBride has touched down in London to talk to a gathering of record industry executives, managers and new-media pioneers at a seminar organised by music industry law firm Lee & Thompson. Even though he's quietly spoken and battling jet-lag after a 6am arrival at Heathrow, you don't have to listen to him talking for long before you understand that he's a man on a mission.

He has been hitting the headlines in North America for his bold declaration of support for Texan father of four David Greubel, one of many US citizens targeted by the Recording Industry Association of America (RIAA) for the alleged crime of downloading music via file-sharing services. After Greubel's 15-year-old daughter Elisa wrote to Nettwerk's rapper MC Lars saying how much she sympathised with his track "Download This", McBride pledged that Nettwerk would pay for Greubel's defence. He's aghast that the industry he's involved with could consider suing its own customers. "I believe the RIAA is suing my future," as he puts it.

Most defendants have reached a settlement with the RIAA rather than risk the stress and expense of a court case. So will Mr Greubel take the stand?

"I sure hope not," says McBride, in his quiet, careful tone. "My reason for taking on this case was to stop the litigation, not to win the litigation. I believe in copyright, but what I don't believe in is people who share music and don't commercially gain from it being sued. People who pirate music and make commercial gain from it should be sued, and that's the difference."

He's convinced that encouraging the sharing of music expands the market and ultimately boosts profits, as happened in 2004 when the controversial file-sharing network Kazaa was at its peak of popularity. He knows executives within the major record companies who sympathise with his position, even while their employers' official stance remains the one expressed by RIAA spokesman Jonathan Lamy: "Stealing another person's property is theft' it's against the law and breaking the law must carry consequences." However, so far it's hard to find major label bosses prepared to take the leap into McBride's iconoclastic vision of the industry's future. In Terry-world, corporate hierarchies have been demolished; decades-old models of music's production and distribution have been incinerated; and the relationship between artist and audience is being transformed. His view is aptly summarised by MC Lars' satirical couplet "hey mister record man the joke's on you, running your label like it was 1992".

At the core of McBride's thinking is what he calls "behavioural marketing", which might be translated as "fan power". In essence, you harness the fans' enthusiasm for an artist as a marketing tool.

"We have a band from Long Island called Brand New. We've done 50-date tours where we haven't spent more than $1,000 on all of the tour advertising. We've built up a street team of 80,000 kids - they're organised by street team leaders, depending on the actual city they're in - and we put a PDF [Adobe Acrobat] file of the band's poster on the internet. The kids print the posters, put the date on and stick them up around town. We have zero outgoings, the concerts sell out, and we can price tickets at $15 because we have no costs. So that's behavioural marketing."

While the big labels are trapped in an avaricious we-own-everything mentality, McBride's philosophy is that if you give more, you gain more. The great enabler is the internet, which dispenses with the cost overheads of manufacturing and distributing compact discs. Audiences can be enticed to try new albums or new artists by offering them free downloads, the process subsidised by wrapping music files in a popup advertisement.

Tapping into grass-roots enthusiasm by selling music directly and cheaply from a band's own website in a "band-to-fan" transaction has already proved a potent tool. (Brand New sold half a million albums this way.) Getting rid of digital rights management restrictions hampering all legal download services would allow music to be sold cheaply enough to make it competitive with illicit peer-to-peer networks where fans swap files among themselves.

"If you could buy tracks legally for 25p each, kids can make more money working in McDonald's rather than spending an hour trying to get their songs via peer-to-peer, getting rid of malware, cleaning up and re-labelling files," McBride says. "This generation is multi-tasking and their time is extremely valuable, and it does cost them money to download from the illegal marketplace."

Once the price is right and artificial impediments are swept away, the peer-to-peer model can become the perfect means of delivery. "It's the most effective and efficient distribution system for digital files in the world. It allows you to mobilise and monetise the behaviour of music fans, instead of suing them and using fear."

Maybe this is what John Lennon meant by "Power to the People". He surely would have applauded McBride's vision of a transformed music business, driven by the fans and the artists rather than by chart-fixing and exorbitant promo videos.

"We haven't had a new-blood revolution since Nirvana and grunge," McBride asserts. "Now you've got a whole new scene with artists on indie labels or their own labels. At last we're getting rid of the homogenisation of the 1980s and 90s, and we're seeing some really cool and interesting new music. It's one of the most exciting times for the music business in decades."