The fact is that if you made a record that cost $100,000 to record

I think this is insanity. Maybe at one time the amortized cost of all the equipment plus the time of the engineers, etc. would add up to that much... but technological progress means that the band and a reasonably knowledgeable techie can master a decent album for less than $5000 worth of equipment that can be reused indefinitely: the amortized cost goes to zero plus depreciation over time.

and another $200,000 to promote,

Only relevant to the biggest acts---the ones from which the labels are expecting a huge return---making your example somewhat of a straw man. I'm sure the labels have lost lots of money on bands that didn't live up to the marketing hype, but they've made it up many times over from the big acts.

However, this is all irrelevant to a world in which no one pays money for prerecorded music, the world we're on the verge of entering. In such a world, I envision something like what Nick sees: smaller acts paying for their own marginal production out-of-pocket; and huge acts making money on tour with recordings used as promotional material for the live show. I simply don't think this is a bad thing.

But whether I think it's good or bad is irrelevant: it's happening. It's only a matter of time.

Banks will not be remotely as kind. Not only will they want every penny back *including interest* but they will also filter out the applicants to make sure that there is absolutely NO doubt that the project they are funding, be it a recording or a tour etc. WILL succeed. If a recording fails dismally, or the singer gets electrocuted and dies on stage mid-tour, the bank will still demand their money back. The labels would be prepared to "gamble" on something like this though, and be prepared to eat those losses.

This is dealt with using insurance: the band has to borrow their expected cost + the cost of insuring the amount they borrow, somewhat akin to using life insurance to guarantee your spouse doesn't lose the house when you die. Unfortunately, this gets a little complicated when the trigger isn't "disability" or "death", so I can better imagine a band not borrowing money directly from a bank, but from some intermediary that makes the loans and pays for the insurance but demands a cut from tour profits. (Sort of like a record label, but without the assumption that money will be made from selling recordings.) There's no reason such a system couldn't work.

Kyle