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CD Blues: Music Industry in Upheaval

March 12th, 2008 · No Comments

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The recording industry has been fuming about file swappers illegally downloading songs and cutting into recorded music sales for years. The industry’s frustration must have escalated even higher when the Grammy Award-winning British alternative rock group Radiohead decided to give away their 2007 album “In Rainbows” on the Internet (www.inrainbows.com) for whatever price fans wished to pay, including nothing at all.

For their seventh studio album, Radiohead was free to try its own business approach. Its contract with record corporation EMI had expired after its previous album, 2003’s “Hail to the Thief,” and it turned down multimillion dollar offers to sign a new contract with major labels. It also had millions of fans around the world. So they decided to try an experiment by offering their seventh studio album, “In Rainbows,” online with a tip jar approach.

“It’s not supposed to be a model for anything else. It was simply a response to a situation,” Thom Yorke, the lead singer of Radiohead, said in a Wired magazine interview. “We’re out of contract. We have our own studio. We have this new server. What the hell else would we do? This was the obvious thing. But it only works for us because of where we are.”

Radiohead didn’t disclose the sales revenue or numbers of downloads, but one source claimed at least 1.2 million copies of the album were downloaded in the first two days. In an interview with an Australian newspaper, Yorke revealed that about 50 percent of the downloaders took the album for free. But, a study by comScore conservatively estimated that Radiohead made an average of $2.26 on its album downloads. If that’s the case, Radiohead may have still have made more money per recording than the royalties they might have earned with a release by a major label. That would surely leave recording industry executives weeping.

Still, there remains a market for albums releases in compact disc form. In January 2008, after Radiohead ended the three-month availability of “In Rainbows” and released the album in CD form, it immediately became the top-selling album in the U.S., confirming a level of continuing viability for the CD, even as it is threatened by digital downloads.

Although Radiohead’s Thom Yorke said the online album release experiment was not supposed to be a model for anyone else, it ended up being just that. Hip hop artist Saul Williams released digital downloads of “The Inevitable Rise and Liberation of Niggy Tardust” (niggytardust.com) for $5, with a “free” option to the first 100,000 customers.

Williams’ recording was produced by Trent Reznor of Nine Inch Nails. Just a few weeks ago, Nine Inch Nails released “Ghosts I-IV,” a four-album recording with 36 songs, at ghosts.nin.com. “Ghost I,” the package of the first nine songs, were available for free download along with a 40-page pdf file of images to accompany the entire recording. The rest of the 36 digital song files were available for purchase for only $5. CDs could be bought for $10, or in a $75 Deluxe Edition Package, or the Ultra-Deluxe Limited Edition for $300.

Despite the no-cost and inexpensive options, all 2500 ultra-deluxe packages were sold out in just a few days. This suggests that even if CDs cease to be the main format for music in the coming years, they will likely live on in collector’s packages.

The new forms of music distribution by Radiohead, Nine Inch Nails, and other artists characterize an entire music industry in transition. In 2007, The Eagles released “Long Road out of Eden.” Despite the fact that it was released on the Eagle’s own independent label and sold only through their Web site (eaglesband.com) and Wal-Mart stores, it was one of the best selling albums of 2007.

Veteran performers Joni Mitchell, Paul McCartney, and James Taylor also shunned major labels, and released new recordings through Starbuck’s Hear Music label. And iTunes surpassed Target and Best Buy to become the nation’s No. 2 music seller, just behind Wal-Mart.

Given the upward trajectory of digital download sales and the downward trajectory of CD sales, the only thing clear about the music industry is that iTunes will eventually displace Wal-Mart as the top music seller.

Tags: Media Economics · Music

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