You may have missed it, but music business history was made May 30 when singer/songwriter Amanda Palmer raised $1 million in less than a month for an album no one has heard. She did this on Kickstarter, an online platform that has helped thousands of creators raise money for everything from movies shown at the Sundance Film Festival to vertical food gardens meant to hang in urban apartment windows. It was an astounding sum of money for an artist without a record label, radio airplay, widespread touring success or other factors typically associated with success in the music business.

What Palmer did was reinforce an important point: If you have fans, if you can raise money on your own, you have control. Five years ago, Radiohead let fans name their price to purchase an album download. Four years ago, Nine Inch Nails simply gave an album away. The record business hadn't had another seismic shift until Palmer gave independent-minded artists a new role model.

Crowdsourced financing platforms like Kickstarter, or crowdfunding, demands new thinking about the artist-fan relationship. Aided by technology, an artist can tap into fans' enthusiasm to record and market albums and undertake tours. Some artists will undoubtedly be uncomfortable with this new relationship. Others will find it liberating. "You're not enslaving yourself to your fans," says Palmer, formerly half of the duo Dresden Dolls. "You're giving them the tools to support you and give you capital."

Palmer's campaign raised an astounding $1.2 million in 30 days from 24,883 backers. Every backer will receive at least a digital download of the album, "Theatre Is Evil," with bonus material exclusive to Kickstarter contributors. The most popular level of funding, $25-$49 for a limited-edition CD plus a thank-you card and the digital download, had 9,333 participants. A pledge of $50 will get a limited-edition vinyl LP, a thank-you card and the digital download. The packages get more extravagant as the pledges get more expensive: $100 gets a hard-cover, full-color art book with artwork from more than 30 artists; $250 earns a series of 7-inch singles and a surprise gift. Five hundred dollars could get a custom-pained turntable.

Live events are more expensive. A party in Boston for backers costs $250. Parties in Berlin, London, New York, San Francisco and Los Angeles went for $300 a head. A private house party at some point in the next 18 months went for $5,000 - 34 of them were taken. Two people paid $10,000 apiece for dinner and a portrait painted by Palmer herself.

Kickstarter participants are paying for something unique and limited. The album will get commercial release when the CDs, LPs and books are mailed to supporters, but the Kickstarter items - with all their attention to detail and extravagance - will never be sold at retail.

Palmer calls the ability to sell live events directly to fans a "game-changer." She first experimented with house parties in Australia in 2011. Attendance was limited, and people could buy a show but couldn't promote it as an Amanda Palmer show and sell tickets. Fans usually banded together - sometimes on Facebook - and collectively paid the $5,000 for a concert. In return, she got a gig with minimal production costs that would be unattainable at a traditional venue. "There's no promoter fee," she says. "My agent doesn't take a commission. If I were to play a show at the Metro with a $5,000 guarantee, I'd be lucky to walk away with $500."

Taking pledges changes the game for recorded music, too. Kickstarter doesn't take donations. It takes preorders. Fans who commit to a project - Kickstarter charges a person's credit card only when a project's funding goal is reached - are locked into their reward. Taking preorders on a digital release is simple because the marginal costs of distribution are effectively zero. But getting preorders on a CD or LP is a fantastic way to sell physical product - especially if the products have high-quality packaging.

Preorders eliminate the risk normally associated with recording and releasing music. Artists know exactly how much money is required for manufacturing and distribution. Normally much of an album's marketing budget has already been spent before a release even reaches a retail store. That type of risk and uncertainty might be acceptable for large labels, but small labels and independent artists have a lot riding on any single project.

Palmer's Kickstarter campaign has what Girlie Action's Kevin Wortis calls an "air-tight" marketing campaign. Wortis is part of the label services team behind Palmer's self-released album. He explains that Palmer isn't beholden to retail because the preorders have paid for the project. Palmer will set aside some money to market the traditional release that will come after the limited-edition CDs and LPs are shipped in September. All marketing efforts beyond that point will market her brand, not the album. In effect, Palmer's album will turn a profit from day one.

PledgeMusic founder/CEO Benji Rogers sings the praises of preorders, too. His platform has put albums by Charlie Simpson and Funeral for a Friend in the top 40 of the U.K. albums chart and has hosted nearly 1,000 campaigns in its three-year history, from a fund-raising campaign by small Manhattan music venue Cake Shop to the group Ben Folds Five.

Yet Rogers is careful to point out the differences between his company and Kickstarter and IndieGogo, another fan-funding platform. PledgeMusic's emphasis is less on fund-raising - unlike Kickstarter, PledgeMusic doesn't reveal how much a campaign has raised - and more on prerelease marketing. As is sometimes the case with Kickstarter projects, artists often use PledgeMusic to raise awareness for recording projects and pull the fan into the creation process. "If you involve the fans in the journey by taking them along, it's a living, breathing campaign," Rogers says.

The impact of Palmer's Kickstarter campaign goes beyond the practical aspects. Her ability to plug $1.2 million raised from fans into a multifaceted, artist-driven business entity should awaken people to the disruption going on in the music business. Of course, fan-funded projects, label services companies and DIY spirit have long existed, but Palmer's campaign is the same kind of inflection point as Radiohead's pay-what-you-want release of "In Rainbows" in 2007.

Wortis - who co-founded label services company World's Fair before joining Girlie Action in March 2011 - remembers "In Rainbows" well. "The World's Fair phones went crazy when Radiohead did the pay-what-you-want album," he says. The company wasn't offering that type of online solution, and many bands before Radiohead had given music away for free. But people quickly understood the idea behind it and wanted the platform to do something similar. When people see Palmer's Kickstarter-fueled album release and tour and want to replicate it, they'll find the pieces are ready to be assembled.

Radiohead and Palmer are the best examples of the way that the distance between an artist and fans has been shortened. "All the middlemen are coming down," Wortis says. The New York-based company has become the operation center for much of Palmer's career. Her manager, Felice Ecker, is a Girlie Action co-founder. Wortis came aboard to add a label services arm to Girlie Action's public relations and marketing offerings.

The new Girlie Action can handle management, production services, radio promotion, retail marketing and social media for midsize U.S. artists and European labels that need a presence in the United States. Ecker says that having Palmer onboard has allowed the company to maximize its use of all of its pieces. "Now we're in a place where we can take all this and make it work for somebody."

The management piece brings everything together, Wortis says. "Everybody's been talking about 360 deals or 360 services. Amanda has let us offer a real 360 service. We handle everything under one roof. Because there are fewer people involved, we can be very nimble."

This is the landscape in which labels will need to compete in the coming decades. Fans, label services companies, management firms and even multinational brands can pump money into an artist's career like never before. Artists who need to assemble a team to promote and market a record will find no shortage of service companies and independent consultants cast off by shrinking labels and distributors. Being able to distribute and market digitally reduces even further an artist's need to cede ownership and control to a label.

It will be survival of the fittest. As artists gain more options, labels will need to evolve to stay competitive. Because artists can find funding elsewhere, labels will need to sweeten their offers. Major labels will need to tighten their grip on vital gatekeepers like TV exposure and prime brand sponsorships. Independent labels will need to offer a broader range of services. Labels of all sizes will find that having less ownership of the recordings in their catalogs will be the price of doing business.

"No one is saying the labels are going away," FLO {thinkery} founder Mark Montgomery says. He has seen labels survive and adapt as technology has put artists in closer contact with fans. Montgomery was selling CDs online as far back as 1996 through a company he co-founded, Chelsea Music. He would later co-found echomusic, a direct-to-fan e-commerce company that Ticketmaster acquired in 2007. "They are being recast. They certainly add value in some ways to the market. The question is, What is their value proposition going forward?"

Amaechi Uzoigwe worries that tools like Kickstarter don't comprise a business plan for a new artist who needs to build a fan base. The money can be raised, he says, but it won't go far. Labels are in a unique position to take the financial risk necessary to develop a career.

Uzoigwe, who co-founded hip-hop labels Ozone Records and Def Jux Records and founded World's Fair along with Wortis and Scott Booker, believes many young artists should be more concerned with making great music than getting funding. "If you can nail the music part, the other things fall into place."

Artists have had alternative financing options before Kickstarter launched in 2008. In the United Kingdom, Slicethepie.com launched in 2007 to help artists raise money for their projects. The site has since morphed into music reviews that provide feedback to developing artists. Acts could raise money from fans through their own means. Singer/songwriter Jill Sobule created a website in 2007 to raise donations to record and release her album "California Years." Rock band Marillion was using fan preorders to fund its recordings as far back as 2001.

Fan-funded projects can be especially attractive for artists with established fan bases. In January, husband-and-wife team Kelly Willis and Bruce Robison raised $44,856 from 563 fans on Kickstarter. Willis has released albums on MCA Records, MCA Nashville and Rykodisc since 1990. Robison has released numerous albums and has written country hits for the Dixie Chicks, Tim McGraw and Faith Hill, among others.

"If you go to a record label these days, they're going to want a piece of your touring, merchandise and everything else," says Mike Crowley, who manages Robison and Willis in addition to singer/songwriter Hayes Carll. "Artists without the overhead of a record company have the ability to make a meaningful amount of money by putting the record out themselves."

"You don't need Sony," Uzoigwe says. "But you need a team unless you're just trying to sell a couple records." It's a message he worries is getting lost in the hyperbole about DIY fund-raising. But Uzoigwe also acknowledges that "this part of the market is still very young, and certainly has potential to develop into something more robust."

Artists don't have to turn to either fans or labels for financing. EMI Label Services may give an artist an advance if merited by the sales potential, according to a person familiar with the distribution and marketing deals. The division has released albums by Slash, Snoop Dogg, Five Finger Death Punch, E-40 and such G-Unit artists as Lloyd Banks and Tony Yayo.

Label services and management company Thirty Tigers can provide artists the tools, expertise and money they need to independently release music. The company, whose catalog leans toward rock and Americana, has given advances for most of its projects in order to compete with offers that labels give artists, co-founder David Macias says. Thirty Tigers can offer an artist ownership, control and the possibility of more money on the back end, but needs to match the front-end money offered by labels. "For artists we're a good fit for, I want to remove every impediment for doing business," Macias says.

The partnership is a recent alternative to the traditional label deal. Nashville-based Bigger Picture Entertainment creates joint ventures with artists that are backed by money it has raised from investors. The company promotes its roster of country artists, which includes Chris Cagle and Craig Campbell, through its in-house radio promotion department and builds its artist websites with the wholly owned Web services firm Idea Den.

Artists also have online tools other than Kickstarter to raise money from fans and take preorders - and they should get a boost from Palmer's success. "Amanda Palmer's Kickstarter campaign has been great for us because we're getting our door knocked down," PledgeMusic's Rogers says.

Palmer is a provocative cult artist who has made her online interaction with her audience part of her art. Signed with the Dresden Dolls to Roadrunner Records in 2003, she began campaigning for the label to drop her as a solo artist in 2009. (Part of this campaign was a song she performed live with the lyrics, "Please drop me, what do I have to do?/I'm tired of sucking corporate dick.")

But with crowdfunding, artists who feel constrained by labels can have business structures that fit their personalities, capabilities and goals. "The biggest difference is that for an artist like me, I felt that when I was on a label I was actually penalized and punished for my enthusiasm about a project," Palmer says. "I would walk in to see a label with a crazy idea and all I got was eye-rolling and frustration. because they wanted things to be simple and easily and packaged."

Alternative financing allows an artist like Palmer to blossom. Rather than run ideas through layers of bureaucracy, she's able to create the kinds of products she wants, engage her fans how she wants and spend what she feels is necessary. "Roadrunner was specifically a label about the bottom line," she says. "Amanda Palmer has definitely never been a bottom-line artist."

Of course, being CEO isn't for everyone, but Palmer is comfortable and capable in the role. After her fans demanded "Theatre Is Evil" for the spelling of her upcoming album, Palmer insisted the team scrap 3,000 watermarked CDs with the original spelling "Theater Is Evil." Saving money would've meant ignoring her fans' pleas. "She's absolutely delighted she can be in the driver's seat and make those decisions," manager Ecker says. "She's both an artist and businessperson."

Palmer became a bit of an Internet sensation in 2009 after she raised $19,000 - on the fly - in a single evening selling T-shirts through Twitter. When her latest Kickstarter campaign passed the $1 million mark, Palmer tweeted a photo of herself with the words "one fucking million" scrawled on her naked torso. "I would define it as intimate," she says of her relationship with fans. "They know me as well as my good friends do. I do not try to have a veil of mystique."

Now she has learned the value of overdelivering to fans - something that would be difficult to do if signed to a label. Her previous Kickstarter campaign, recordings and a series of concerts with her husband, comic book writer Neil Gaiman, was fulfilled right before her record-setting campaign began. Palmer's team believes the buzz from pleasantly surprised fans gave momentum to her last Kickstarter project.

Palmer's team believes the next round of limited-edition CDs and LPs will wow her fans and create even more momentum for the commercial release of "Theatre Is Evil."

"There are things in this package people aren't expecting and Amanda hasn't thought of yet," Wortis says.