KEY POINTS:
Is the bell tolling for the recorded music industry?
Some commentators are saying as much following a decision by British band Radiohead to release their next album from their website, cutting out the record labels.
Even more revolutionary, the group is asking fans to decide how much to
pay for In Rainbows, available for download from tonight. A spokesman for Radiohead says: "As you might imagine, offers are ranging from nothing to more than you might pay for a CD in the shops."
In part, Radiohead are asking: how much do you value us? But implicitly, they are also questioning how much people are prepared to pay to download music over the net.
It's a question that music companies have been grappling with ever since the file-sharing site Napster was closed in 2001.
Once again, the economics of the music industry is being turned on its head as artists take matters into their own hands. Haven't we already seen Prince sell 3 million copies of his new album via a deal with the Mail on Sunday during the (northern) summer? Lily Allen, Arctic Monkeys and countless others have pushed themselves via social networking sites.
For its part, the public has been ripping the industry's conventional business model to shreds by illegally downloading music for years. internet piracy and the switch to digital sales are costing the music majors: profits from EMI's music division plunged by £100 million ($267 million) in the year to March 2007.
IFPI, the trade body that represents the music companies, has estimated that the global traffic of illegal CDs is worth £2.45 billion. About 20 billion songs were illegally downloaded or swapped worldwide in 2005/6. The organisation also reckons that more than one in three CDs is pirated.
But it's one thing to conclude the music companies are in trouble, quite another to conclude they will shortly be consigned to the dustbin of history. Mark Mulligan of Jupiter Research said Prince is using BMG/Sony to distribute his new album in Europe, but not in Britain, where the Mail was deemed to have done the job for him.
Lily Allen and the Arctic Monkeys, after their internet launches, have signed to EMI and Domino Records respectively.
Mulligan says: "Many artists want a record deal. What the net has done is allow new people to be recognised, but once established they don't want the hassle of marketing and distribution, which are the core strengths of the companies.
"At the other end of the spectrum, established groups such as Radiohead, which have been around for years, have a loyal fan base and can exploit the internet for their own advantage."
But it's not a zero-sum game. Radiohead's new album will still be launched conventionally in the new year.
Chris Hufford, Radiohead's manager, says the website launch is just "another way of doing things".
But Chris Parry, founder of Fiction records, says that the industry is undergoing a seismic shift.
"The music companies used to have a monopoly when it came to finding new talent and distributing songs. Now artists such as Radiohead are beginning to challenge the status quo.
"New technology has subverted the way the majors used to do business. The balance of power has shifted from the companies to the fans and artists."
Ben Cardew of Music Week says: "It's extreme to think that music labels won't exist in 20 years time, although some people are talking about it. On the other hand, marketing, production, studio management and distribution are time consuming and many artists don't want the hassle."
Clearly, the internet offers the opportunity for artists to sideline the companies, but this hasn't happened on a large scale.
Paul Lewis, acting editor of Music Week, says: "It's hard to see where it's going to end. But the business is going through changes other than those brought about by the internet.
"Music is not as mass-audience as it once was - there are lots of other things competing for people's time: computer games, social networking, mobile phones. That is why some companies are dropping the word music altogether and calling themselves entertainment groups."
The rights to live concerts, merchandising and broadcasting are increasingly a part of deals between companies and artists as the majors seek alternative revenue streams to offset a steep decline in CD sales.
A different sort of contract was established in 2002 when Robbie Williams set up a joint venture with EMI that saw the music company take a 25 per cent stake and a share of profits from DVD sales, touring and other commercial initiatives, as well as music sales.
Analysts say a hybrid system is emerging, one that is increasingly innovative. A scheme has begun in the US which allows iPod owners to download songs they hear at Starbucks directly on to their device for 99 cents. Mmusic companies know they have to adapt to survive in the digital world. But how they do it, profitably, is unclear.
Talkin' bouta revolution
* Radiohead release their latest album In Rainbows on their website tonight, the latest move by artists to bypass traditional record company release.
* Fans wanting to download it will be asked to pay what they think the record is worth.
* Earlier this year Prince issued his latest album in Britain by giving it away free in the Mail on Sunday.
* The rights to live concerts, merchandising and broadcasting are increasingly a part of deals between companies and artists as the major labels seek new revenue streams.
- Observer
