Going through all the comments, there are some great ideas. We are bulding a community website for entrepreneurs/startups and could probably use some of these ideas ourselves.

Here are a few more:

- Allow musicians to offer "live" concerts to their fans or to a worldwide audience, using the free Google+ hangouts or air feature. I think they just released an API. The most popular ones can be sponsored or you could just run ads on the Youtube videos and share revenues with the musicians.

- Setup a buy/sell section on the site (or on a separate subdomain or website) for used music instruments, accessories, books, sheet music etc. and either charge a small fee for listing or a transaction fee. If you don't want to run an ecommerce site, just let them list their stuff on Ebay or Amazon, but allow links to it from their profiles. These could be affiliate links and you could split the revenues with them (with full disclosure on the site).

- Have targeted email newsletters, for different interest areas. Sell advertising within the newsletters (it won't clutter your site).