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Is Free Music Killing The Industry? - Nov 26, 2007

“If the best band in the world doesn’t want a part of us, I’m not sure what’s left for this business”

picture It is already old news that CD sales are going down worldwide as result of Internet file-sharing and downloading, with record labels frantically seeking new avenues of revenue from music.

However, recent months saw some new developments that seem to mark a point of no return in this radical decline in the industry - first, it was EMI's takeover by Terra Firma, second, the growing trend of major bands and veteran stars - Radiohead, Prince, Bruce Springsteen, Madonna, Paul McCartney - to abandon the labels and offer new releases as free downloads, as giveaways inside daily newspapers, or as part of a deal with a coffee chain.

But is it really the end of record labels? HitQuarters' exclusive analysis suggests that there are actually plenty of signs to suggest the contrary.

Pop and rock stars giving record labels the finger!

In October 2007, the major UK band Radiohead took the extraordinary step of releasing their eagerly anticipated new album without the aid of either a record label or a retail price, allowing the consumer to pay what they want. Is this a mark of things to come – will the record industry as we know it face redundancy and music lose its value in the digital age?

With their album contract with the major label EMI Music having expired, the influential rock band decided the time was ripe to ask whether the modern artist and music consumer needed a record company anymore and so on October 10 they self-released their seventh album ‘In Rainbows’ as a digital download for which customers chose their own price.

In Time Magazine, the band singer Thom Yorke described the move of releasing an album independently as a, “’F—k you’ to [a] decaying business model.”

The move sent shockwaves through the record industry with one major label executive remarking that it felt like another death knell for the record label, “If the best band in the world doesn’t want a part of us, I’m not sure what’s left for this business,” he said.

Radiohead may be the biggest and most significant, but they are far from being the only artist to have chosen to ignore the conventions of labels and price when releasing their music. They are part of an increasing trend in the artistic community that questions the necessity of mainstream record industry and their perceived value of music.

The last six months alone has seen Prince give his latest album away with a British newspaper, Bruce Springsteen make his new single available as a free download and even industry veteran Cliff Richard tell fans they could dictate the price of his new album.

Successful indie rock band The Charlatans announced they would give their new album away online, their singer Tim Burgess related his vision of the future. “I want the people to own the music and the artists to own the copyright. Why let a record company get in the way of the music?”

Even the most successful pop music composer ever, Paul McCartney, decided the major record companies are not good enough for him anymore when he signed to the Starbucks company record label in March.

The sales of ‘Memory Almost Full’, his first album for the coffee chain, almost doubled those of his previous record with EMI subsidiary Parlophone, and have justified a long term move to the label.

The snubbing of the traditional record industry is a devastating blow for a music business already hit hard by file sharing and falling CD sales, and one struggling to find a new role within the industry.

Big Four No More?

A succession of company mergers and sell outs are sure signs of an industry crumbling and the takeover of Radiohead’s ailing ex-label EMI, one of the world’s so-called ‘Big Four’ record companies, is the latest in a string of downsizing.

The British label was reportedly in financial freefall, reporting losses of £265 million in May reportedly because of underwhelming CD sales, when it was bought by private equity group Terra Firma for £2.4 billion
.

Its dire losses cannot be blamed on a waning interest in music, because although sales are falling, the demand for music has rarely been more pronounced, highlighted by the growth in festival and live music attendances, and the desire to make music remains undiminished.

The takeover is a clear indication of a company that failed to adapt and take advantage of the new age of online music.

The ‘In Rainbows’ release was ultimately not so much the cataclysmic ‘end of the industry’ event the media storm inferred, but a significant gesture to show how vulnerable record labels are, as well as being a great way to promote their subsequent CD album release.

Radiohead may have bypassed the record label business to give their album its first exposure, but before the year is out the CD will be distributed the traditional way, by a record label - albeit not EMI or one of the other Big Four.

The band might be keen to move their music wholesale into the online realm, but a huge share of the audience is yet to be convinced by intangible MP3 music and still wants a ‘real’ album in exchange for their hard currency
.

The traditional CD buyers will be joined the many fans who, unsatisfied by the insubstantial form and inferior 160 kilobits per second sound quality of the digital release, now want the ‘proper’ album. This means many fans will be buying the album twice, an idea that helps quash any concerns that Radiohead face financial disaster by giving away their music.

This harks back to 2000 when many predicted the sales of Radiohead’s new album ‘Kid A’ would be adversely affected by the album’s prior availability on illegal file sharing site Napster.

The album’s surge to the top of the US Billboard charts not only proved the theory bogus, but that the opposite was arguably true, and that the leak had promoted sales.

If the digital release of ‘In Rainbows’ was a promotional tool for the CD release, then the whole release parade serves to promote Radiohead’s international tour in 2008.

With music losing its value, or the price elected by the industry, then the resurgence in the popularity of live concerts has meant that artists now make most of their money from live performance.

The future is now one where instead of promoting an album with a concert tour, artists promote their tour with an album. The Rolling Stones’ last album, ’A Bigger Bang’, was moderately successful but the subsequent tour grossed a reported half a billion dollars.

In July this year Prince gave his latest album away as a free gift with a British newspaper, provoking anger from music retailers, who said that music should not be treated as a cheap, disposable commodity.

Three million copies of the CDs were distributed with the Mail On Sunday newspaper before fans uploaded the album to the internet, fulfilling Prince’s aim of getting his music out to as many people as possible. The American musician’s true ambitions became clear when he sold out 21 consecutive London concert dates.

The manager of The Charlatans, famed music impresario Alan McGee, believes the business model for selling music is outdated and the revenue for music in the future will come from merchandising and live ticket sales.

Warner, the other Big Four label most vulnerable to collapse, has recognised this and claims now to be moving its focus away from CD sales and onto looking into opportunities for generating revenue from other aspects of the industry, such as touring, merchandising and artist management.

Guy Hands, the head of EMI’s new owners Terra Firma, told his staff in a leaked email that Radiohead’s act was, “a wake up call which we should all welcome and respond to with creative energy,” and is planning to accelerate his company’s digital and online strategy.

With a roster of bankable talent including Joss Stone, David Bowie and Robbie Williams, EMI will be worrying that anyone could follow Radiohead’s lead.

The revenue each could earn performing at concerts and festivals is outstripping that of CD sales, and a decision to break free from the label is not the risky proposition it once was.

A true crisis – or merely a new publicity stunt?

Perhaps wisely therefore, Hands plans to stop EMI being in thrall of its superstars. He suggests moving away from the standard model of paying such large advances as Robbie Williams’ £80 million deal in 2002, in exchange for the label’s right to keep the lion’s share of the revenue from new releases.

The label could instead just subsidise the production of an album or a tour in exchange for a share of the profits.

With global brand Radiohead side-stepping the record industry and influential artists such as Paul McCartney and Madonna snubbing traditional labels, some are suggesting the walls of the industry are already falling. However this is not the case.

There are few artists in the world as powerful and influential as Radiohead, and few able to pull a stunt like they have and make it work. The trend towards giving away music and focusing on live music earnings is still the preserve of the established acts.

The succession of other artists that have dallied with ‘free music’ promotions, such as Prince, The Charlatans, Cliff Richard, Simply Red and Ray Davies, are all similarly established acts, but ones united by faded star status.

Their days of generating automatic media hype when they release anything are over and so have started to turn to new methods of attracting the attention of the public, as well as selling some concert tickets.

As one newspaper columnist commented, “Had it not been for the hype, [Prince’s] Planet Earth would have slipped out almost unnoticed, as many of his recent albums have done.”

The strategy of generating publicity by giving away music has a limited lifespan at least. There are only so many times artists like Prince and Ray Davies can generate worthwhile publicity from giving their album away with a newspaper for instance.

It is still in the early stages, but Radiohead’s precedent will inevitably lead to a new era for the way music from across the spectrum of genres is available to the public.

For instance, recent months have already seen a number of young acts offering their new single as a free download as a way of attracting attention to their music.

Some worry, however, that the trend towards giving away music and focusing on live music earnings excludes new young bands unable to attract large live audiences who can’t afford to give away their music.

There is no way to predict how the situation will pan out for the less established artists if music loses its value altogether, but there is some small reassurance in the fact that of the 1.2 million people worldwide that downloaded ‘In Rainbows’ from inrainbows.com during October, 38 percent of them paid for it, despite having the option of taking it for free.

Of those that did pay for the album, the average price was exactly $6, meaning that Radiohead netted close to $3 million in digital sales.

How Can Independent Artists Benefit From The New Prospect?

Representing the smaller artist, Canadian artist Jane Siberry offers more comfort. Fans of the singer-songwriter have been able to choose what they pay to download one of her tracks for years and despite suggesting the industry standard of $0.99 a track, the average price paid is reportedly $1.18.

The statistics from the ‘In Rainbows’ sales show that the price fans paid for the album varied from nothing to up to $20.

This suggests that many factors came into play when the downloader chose how much to spend, such as how much they earn, how much a fan they were of the band, how much they wanted to support the band, or how much they thought they needed support, and ultimately, how much they thought music was worth.

The example of Jane Siberry perhaps demonstrates that the smaller and less established the artist, the more fans would be willing to pay to support them. The experiment of choosing your own price shows music will never lose its value as long as there are people who believe it’s worth paying for.

Radiohead’s ‘In Rainbows’ digital release undeniably heralds a new dawn of music sales, but what that future holds is unclear, with all too many questions unanswerable at present:

Will all music become free? How will young artists earn a living? How will they establish and develop themselves without sales income and label assistance? How can mainstream record labels survive when their business has lost its value?

The arrival of file-sharing sites, the advent of the iPod, the emergence of direct artist to consumer social network sites like MySpace and the ‘In Rainbows’ release, all mark pivotal stages in the age of internet music and the demise of the traditional record industry. The question on everybody’s lips is - what will be next?




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