Out with the old.

So, at some point I'll edit this up and make it much better. Feedback in the meantime?

In the fall of 2007, the record industry nearly had a heart attack. One of the biggest bands in the world, Radiohead, announced that they would be releasing their newest album online without the assistance of any record company—and that they would be allowing their customers to pay whatever price they wished in purchasing the set, including nothing at all. This move set off alarms across the business, and sounded a lot like "a death knell for the major labels, as Trent Reznor and Madonna immediately announced they would follow suit and find new ways to release their music" (Levy). After the initial, massively popular download period, Radiohead proceeded to release the album in a physical, CD copy—on very small independent record labels—and the business relaxed, at least somewhat. Still, the event was a major benchmark in the transition of music sales to a more digital-based market, and it's continuing to send out shockwaves.

Whatever else Radiohead's experiment may have been, it was a reflection of a music business that had lost track of where it was headed. The industry's reaction would almost certainly not have been such a negative one had it not been for the very dreary reality already facing record labels: their business is becoming less and less relevant. EMI, the fourth-largest of the world's record labels with an over 15% market share, was recently bought out by an investment firm for relatively little—and since that time, it's still been floundering; just recently, EMI's management announced plans for the near future such that "as many as 2,000 EMI employees--about a third of the label's staff--would be laid off" (Raymer). The reason, on the surface, appears simple: record sales have been in constant decline since the early 2000s (famously, over 1,000,000 copies of Robbie Williams's latest album were sold by EMI to "a firm that intended to recycle them into paving materials in China" after being returned by the retailers, unsold), and with less and less of their product moving with the same promotion and production costs, the labels are losing cash flow (Raymer).

However, that answer isn't as simple as it seems. There are a multitude of reasons why the labels are losing revenue; clearly, the diminishing quantity of actual sales is a part (with its own complex causes), but Radiohead's example shows us that the industry's current incarnation is not working so well on the artistic side, either. Joe Levy, in an article for the Rolling Stone, puts it succinctly (if a little harshly): "What's a label for? The old answer--manufacturing and distributing CDs and promoting them to radio--no longer holds much sway now that music has digitally dematerialized and radio has been deregulated into one vast strip mall. Everyone acknowledges that the labels as we know them are done" (Levy). Though Levy may have been exercising some hyperbole with his last statement—"everyone..."—there's certainly a lot of truth to the idea that many of the functions a label used to perform have become as obsolete as the 8-track cassette. David Byrne, legendary musician and songwriter, wrote an article in WIRED magazine which outlined the basic functions of record companies, then and now; essentially, the main functions were dependent upon the sales of actual, physical copies of the album, produced and distributed by the company. This was the foundation of the industry, and Byrne disagrees with it: "what is called the music business today... is not the business of producing music. At some point it became the business of selling CDs in plastic cases, and that business will soon be over" (Byrne). Brian Eno has an even more grim outlook on the record companies' role: "The only idea they have is that they can give you a big advance... that's all they represent now: capital" (qtd. in Byrne).

All of this, of course, would appear to mean one thing: the record labels need to start finding a way of operating that's more in line with the present market, which is increasingly in tune with digital sales as opposed to physical, singles as opposed to albums, and complete accessibility over a major-label dominated scene. And, if handled correctly, this movement could be a huge boon to the artistic community: the Internet provides unknown artists, without the financial backing of a record label, with the ability to present themselves and their music to the world (in addition to letting established bands like Radiohead release music themselves directly to their fans). Furthermore, Levy thinks Radiohead is exemplifying something else that needs to be done: "Radiohead's masterstroke was putting the audience in control. Control is something that music fans--many of them believers in the specious conspiracy theory that the record industry forcefeeds them garbage... haven't felt enough of" (Levy). Raymer agrees on the nature of the movement: "it's becoming clear that decisions about the future of the music biz won't be made by the majors but by consumers and artists" (Raymer). Such gains in control will inevitably be popular in the same way that Robin Hood's actions were—the record business has developed a reputation as a business composed of slimeballs and lowlifes, who take money from the poor artists and fans while pushing meaningless music; this will likely seem, to the public, to be their just rewards.

The labels, unsurprisingly, see it differently; what is surprising is the way in which they are handling this shift of control to the consumer. As the majors gradually lose their stranglehold, they seem to be falling into two strategies: 1) try to find and adapt to a new, more viable model, and 2) try to keep the current model as relevant as possible. Both of these strategies seem to make sense (the former, perhaps, more than the latter); the way in which they have tried to attack them, however, is questionable at best. The main effort being put forth on the traditional model front is, unfortunately, the infamous RIAA lawsuits; rather than try harder to market albums over singles, or any such thing, the labels have decided to try to "scare the public away from new markets and technologies" (Raymer). This clearly isn't helping their Sheriff of Nottingham image much—by "putting the law above the people," and showing their willingness to single out individuals and sue them for more than they can possibly afford, the industry effectively shows that they do not care for the average consumer (Guzman).

On the adaptation side, the majors seem to be faring equally poorly. The main new concept floating around between the major record industry players at the moment is something called a "360" or equity deal, in which the label deals with not just record sales, but touring, merchandising, publishing, clothing lines, and anything else they can think of for their artist, essentially building them into a brand. These new tasks represent both new functions to replace the outdated ones (an honorable concept) and new revenue streams to supplement the falling record sales income. However, there are inherent flaws in these strategies, not least that while the label would be taking a significant chunk from each of these streams of income to the artist, almost none of the labels doing these deals actually have the capacity to handle all of the angles covered in a 360 deal. They would simply be contracting out the jobs, just as the artist normally would, and taking a cut (leading to the criticism that "the strategy is just another way for the majors to take money out of an artist's pocket") (Marshall). Furthermore, if a label is engaged in all aspects of an artist's career, it'll be putting forth money for every side. The upshot of this is that a) the labels won't be willing to sign nearly as many bands, instead preferring to cultivate and massively promote only a few; b) those bands chosen by the labels will be singularly mass-market types of acts in the vein of a Hannah Montana or a Nickelback, and c) the artists signed to a 360 deal will be unlikely to have much creative freedom (Byrne: "I doubt that creative decisions will be left in the artist's hands... The equity partner simply has too much at stake).

Not that the "band as brand" concept is inherently wrong; it's just not a model that will work for the majority of artists. One of the most successful of the branding artists, Sean "Diddy" Combs, had this to say on the subject: "It takes a certain type of superstar who understands at all times what it takes to be in the middle of a 360 situation. This is not going to solve the labels' problem" (qtd. in Marshall). Indeed, it's very hard to imagine a Suicide or a Pixies signing a branding-style deal—though they are some of the most influential bands of the 20th century, a Frank Black cologne line is simply not realistic. But right now, the major labels are only interested in signing new talent to these all-inclusive career deals. The end result of the 360 system, then, would be fewer, more commercially driven well-known acts—this in a time when the general movement is toward public and artist control. It remains to be seen to what extent the commercialized pop music coming from these deals will exacerbate the labels' problems, pushing the public more into the domain of independent artists and of control on the Internet.

An important question remains unanswered: Why the decline in sales? The record labels still receive money for sales over iTunes and its ilk. There is not, as yet, a clear cause; many point to internet file-sharing services, but it's noteworthy that since the advent of audiocassettes, piracy has been a very common practice; though it is a factor, it is not enough to account for the sharp decline that continues to be seen each year. Raynor provides a fairly simple explanation—the "proliferation of viable alternatives to the established business model"—but it's really too vague to help altogether that much; does he refer here to the tendency of iTunes users to grab just one track from an album or artist rather than investing in the whole album, or maybe to the new downloading subscription services which have begun to be launched?

The answer, however, may be even more basic than that. On the first day of any economics course, and on the first page of any economics textbook, one finds a discussion of the nature of the word "economics," defined as "the study of choice under conditions of scarcity," that is, the way in which people allocate their resources; the relative scarcity of, or difficulty of access to, a product gives it its value (Hall & Lieberman). Is it not, then, possible that people have begun to see digital copies of music as not having monetary value? There are, after all, infinite copies awaiting the consumer of any given piece of music. In addition, this would explain the continuation of piracy, certainly, and why it seems relatively tame compared to most crimes, even when called a form of stealing (a survey taken in 2005 found that "more people consider parking in a fire lane a serious crime" than illegal file-sharing) (Guzman).

At the same time, however, the example of Radiohead gives compelling evidence that people still value recorded music, even in the intangible form of a download. Out of 1.2 million copies of the album downloaded in the first few weeks, the average price paid per download was about $6 US (excluding those who downloaded it for free, who comprised around half). These first few weeks' sales netted the band more than their prior album, Hail to the Thief (2003), had made them altogether—almost $3,000,000. Of course, as Thom Yorke of Radiohead said, "the only reason we were able to get away with this, the only reason anyone even gives a shit, is that we've gone through the whole mill of the business in the first place" (qtd. in Byrne & Yorke). By that, of course, he means that Radiohead is by far one of the most popular bands in the world today, and they knew that they had their fans' respect. Still, it says good things about the consumer's view of the value of music that the download performed so well.

Which brings us, of course, to the essential question: what is it that Radiohead, or any musician, label, or other purveyor of music, is actually selling? This may be an unanswerable question, but what can, perhaps, be discovered is why we buy copies of that music, or what it is that we value therein. Byrne, of course, hopes that the industry will move away from "the business of selling CDs in plastic cases"; as he said, "that business will soon be over" (Byrne). He suggests, rather, that what the record companies should be valuing more—and, perhaps, what their audiences value—is "the relationship and the emotional thing," the intangible connection between artist and fan. As the Internet allows the artist, like Radiohead, to deliver their music directly to their audience, maybe it's that connection which will become the new focus of the music business at long last.

Works Cited

Levy, Joe. "Just $9,250 a Song!" Rolling Stone.1038 (2007): 83.

Marshall, Samantha. "Diddy on the Art of 360 Deals." Crain's New York Business 23.47 (2007): 3.

Raymer, Miles. "Give Up the Ship." Reader 37.19 (2008): 45.

Reporter, Monica G. P. "Music to our Arrrs ; Sure, Pirating Songs Off the Internet is Illegal, but Music Execs Need to See that this is a Populist Rebellion." Seattle Post - Intelligencer May 24 2007: C.1.

Byrne, David. “David Byrne's Survival Strategies for Emerging Artists — and Megastars.” WIRED Magazine 18 Dec. 2007. 20 Apr. 2008. http://www.wired.com/entertainment/music/magazine/16-01/ff_byrne#

Byrne, David, and Thom Yorke. “David Byrne and Thom Yorke on the Real Value of Music.” WIRED Magazine 18 Dec. 2007. 20 Apr. 2008. <>

Lieberman, Marc, and Robert E. Hall. Macroeconomics: Principles and Applications, Fourth Ed. Mason, OH: Thomson Higher Education, 2008.