Sarah Lacy of BusinessWeek laments in the context of the Grokster vs. MGM case, “It takes guts to be a startup in the music sharing business these days… there are also a lot of pitfalls.” Indeed, the legal copyright risks involved with the peer-to-peer file-sharing leave startups with a potential minefield to navigate. Even as Mercora approaches addressing these issues from a “radio” solution and others are planning to leverage Snocap’s technology in their “safer” peer-to-peer offering, the difficulty in playing in this arena is apparent. Yet as the music industry continues to move towards full digital distribution, I believe that there are other areas where startups can capitalize on opportunities in the music space:

Recommendation & Discovery – How do music listeners find and discover new music? Startups like Musicmobs, Audioscrobbler, Savage Beast, and many others offer consumers music recommendations (direct and via distribution channels). Some services plug directly into iTunes to gather listening history & preferences, and others gather data in other ways. Some engines base recommendations on what other users with similar habits listen to, and others try to directly discern qualities inherent in the music itself. All in essence are taking a step towards what I’ve called predictive personalized media.

Piracy Interdiction & Enforcement – Instead of facilitating the piracy of music, MediaSentry (recently acquired by SafeNet) and BayTSP operate on the other side of the coin. In addition to monitoring P2P networks for copyright infringement, these firms help their clients in the interdiction and enforcement of infringers.

Band Promotion – A company called Sonicbids offers independent artists electronic press kits. Bands and solo artists use this product to promote themselves to local venues and music festivals.

Local Show Calendars – While not directly focused on the music space specifically, vertical search engines like EVDB log and facilitate discovery of local music events.

Band Community – The social aspect of music is a compelling one, and while MySpace has a strong offering community features around bands and other music artists, there is probably room for additional innovation here.

Plus, of course, there also DRM offerings and other software infrastructure pieces as well. Certainly the above list is not exhaustive, but is rather a reflection of the possibilities available for music-related start-ups other than delivering and/or distributing the music. The point I am trying to make is that as music continues to transition to pure electronic distribution, new business models and alternative revenue streams will emerge. And there are opportunities for start-ups to capitalize on this trend outside of merely offering the music itself. As an avid music listener, I am personally excited about the technologies and services that help me find, share, and experience music.