A classic essay--White Noise/White Heat by Larry McCaffery revised. McCaffery's argument is that Andy Warhol Presents the Velvet Underground and Nico is an album which contains the origins of postmodern rock.

It was that here that rock music began co-evolving with avant-garde branches of the art world, cinema, and jazz though establishing a feedback loop of influences and borrowings that have been mutually supportive.

I've previously explored this intertexuality in terms of the music and light shows of The Grateful Dead but I've never considered theitr music in terms of postmodernism. I would not have made the connection, despite the Dead's music having characteristics of a postmodern musical style that favors eclecticism in musical form and musical genre; often combines characteristics from different genres, or employs jump-cut sectionalization (such as blocks); tends to be self-referential and ironic, blurs the boundaries between "high art" and kitsch; and is marked by randomness.

I would argue the Grateful Dead's musical roots were in blues, folk, R and B, and bluegrass and that in their relation to mass media and high-tech modes of production, their music has been self-conscious and full of irony from the beginning. Despite this I never made the link to postmodernism. It was MTV that smuggles postmodernism into rock, and I woud have held that it was Madonna who was the paradigmatic figure of the newpostmodern-music TV culture.

What then is McCaffery's argument about the Velvet Underground? He says:

Like fictional innovators from the same period (Robert Coover, Donald Barthelme, John Barth, and Thomas Pynchon, for example), the Velvet Underground systematically and self-consciously began to re-examine and then openly disrupt their genre's conventional assumptions about formal unity and beauty, about the "proper" ways to manipulate their medium's elements into a structure, and about the nature of the creative "self" and "authenticity." Sponsored initially by Andy Warhol, whose role in the postmodernist breakdown of the division between avant-garde and the mainstream is central and ongoing, the Velvets mixed musical styles (folk, minimalism, thrash, jazz, gothic rock) and messages in a way ideally suited for expressing the multiple, contradictory textures of postindustrial urban life. In their early performances in Warhol's multi-media happenings (the "Plastic Exploding Inevitable"), the Velvets' music was presented within a dissolving, multi-genre display of Warhol movies, dance, light shows, and improvisational poetry - a bewildering cacophony of avant-garde noise, light, humans interacting with images and sounds, and the Velvets' deliberately dissonant, minimalist three-chord progressions.

It is argued that in postmodern fiction, poetry, art, and music there emerges a parallel attitude - arising from a mix of affection, put on and put down, and joyful freeplay - toward the images, sounds, and language that we consume as they consume us. In all these postmodernist art forms we see artists deciding to plunge into, digest, and often subvert the profusion of visual, sonic, and information sources that bombard us every day. The result is an immersion within and command of the imagery, sounds, and verbal elements that comprise the postmodern milieu we all inhabit.

Here is the rest of McCaffery's argument about the postmodern significance of the Velvet Underground:

He says that the Velvet Underground's performances:of this period were:

....composed of discrete parts - photographers taking photos of the audience, dance, different Warhol movies being continuously projected onto the bodies of musicians and other performers, etc. - all presented in a non-hierarchical simultaneity that defiantly refused to cohere in any traditional sense. Although the Velvets were, like the Beatles, interested in the way technology could be used to produce unusual sound effects and distortions, they used technology to capture a raw, "naked" sound; thus, in songs like "Sister Ray" and "European Son" (both influenced by jazz innovator Ornette Coleman's equally unconventional notions of dissonance and harmony) they experimented with the effects of repetition, of the accumulated and chance effects of feedback, even the concepts of boredom and willful crudity (cf. Warhol's movies such as Sleep and Empire from the same period), so that a tension develops between the tight, monotonous formal structure and bursts of piercing sounds and pure noise. Often playing with their backs to the audience, and occasionally abandoning the stage altogether while their guitars continued to shriek and drone on, the Velvets also foregrounded the concepts of rock musicians as image or mechanical simulacrum (essentially an extension of Warhol's fascination with the mechanical and reproducible qualities of life and art, the artist-as-machine) in ways that anticipated the more elaborate and playful methods of David Bowie, punk musicians, and more recently, Madonna.

McCaffery's conclusion is that:

In short, the Velvet Underground ushered in the postmodern era of self-conscious, self-referential rock - the rock music that would segue into the glam and punk phenomena of the l970s, into the New York art rock scene of the same period that produced Patti Smith, the New York Dolls, Jim Carroll, and Talking Heads, and which during the 80s would eventually mutate into the rap/scratch/dub and funk collage-sounds of urban blacks, the performance art music of Laurie Anderson, and the peculiar synthesis of jazz/pop/rock of John Zorn, Lester Bowie, and Hal Willner.