"Notes from the Underground" by Nicholas Thompson, in The Washington Monthly (Sept. 2003), 733 15th St., N.W., Ste. 520, Washington, D.C. 20005.

It’s no secret that the music industry has been ailing lately: Revenues from sales of recorded music were down by 15 percent over the last three years. The industry blames young people who download copyrighted music for free from file-sharing networks, and is doing its best to stop them. But instead of fighting technological change, says Thompson, industry bigwigs should take a few pointers from him, a successful young subway musician.

Since releasing his new album in January 2003, he’s sold about 500 CDs in the New York subways. Playing his Taylor acoustic guitar underground every few weeks, he’s made more money per hour than he does as a journalist. To succeed, though, he’s had to study his environment.

"When I first started playing in the subways, I experimented with different prices for my albums. The sweet spot seemed to be a price of $5." His conclusion: That’s what people will pay for a CD with music they like by a musician they never heard of. "So why does the average CD sell for more than $17?" It’s not the manufacturing cost: Thompson’s latest album cost only $1.10 per disk. Lesson 1 for the industry: For albums by artists other than the Rolling Stones or U2, which aren’t going to sell millions of copies, stop paying so much to marketers and other middlemen, and cut prices.

Lesson 2: Get beyond the set formats (altmusic, hip-hop, modern country), and "micromarket heterogeneous bands to scattered audiences." In the subway, Thompson learned where to place himself to make sales. The hallways—where passersby hear the music only for a few seconds—are good for playing Beatles tunes or other familiar music. But his kind of instrumental guitar music does better on the subway platforms—which hold fewer people for a longer period of time.

Lesson 3: Embrace file sharing and figure out how to make a profit from the Internet, just as the movie industry did with videocassette recorders. Big artists lose with file sharing, which is why the industry is fighting it so hard. But it’s a losing fight—and that won’t be a bad thing for most bands or fans, Thompson says. "The Internet allows a wide audience to inexpensively sample a huge array of music. Filesharing networks like Kazaa, and artists who allow free downloads off their web pages, are roughly like playing in the subway. I profit tremendously when people download my songs." It makes them more likely to go to his concerts and ask radio stations to play his songs—"which could one day be a source of album sales and my ultimate transition from a Washington Monthly contributing editor into a major music icon."