Music Industry in turmoil!

Two developments this week suggest that the recording industry is finally taking baby steps in the direction of a genuinely competitive online music market, but the progress continues to be painfully slow.

First, Apple is cutting prices on DRM-free music in an apparent bid to stay competitive with Amazon's launch of a DRM-free music store last month.

This is a particularly interesting development because just last year, the talk was about whether Apple would increase prices on iTunes songs. But now it's looking like further price cuts are more likely to be in the cards.

Even Amazon's 89 cent price point is still a lot more expensive than eMusic, which charges around 33 cents per song.

Meanwhile, Napster has unveiled a new web-based version of its music store that appears to allow people to listen to their music in their web browsers, including non-Windows PCs.

The new Napster will also make it easier for you to embed your favorite music YouTube-style on other websites. Those are great new features, but it appears that the service will still require people to use Microsoft's comically-named (and increasingly irrelevant) PlaysForSure platform if they want to listen to their music on a mobile device, which is quite a handicap in an iPod-dominated market.

It's becoming increasingly clear that the recording industry shot itself in the foot when it sued MP3.com into bankruptcy in 2000. Many of the "new" features sites like Amazon and Napster are touting today—web-based access, DRM-free files—are just warmed-over versions of the functionality consumers could get from MP3.com almost a decade ago.

Imagine how much more vibrant the online music market would be today if the labels had treated sites like MP3.com as a potential revenue source rather than a competitive threat.

Today also marks the debut of Radiohead's latest album, "In Rainbows," but you won't find it in record stores or on iTunes. Without the help of a major music label, the band is promoting and releasing the album over the Web, DRM-free—and/or for whatever price that fans are willing to pay.

Other groups are taking notice. Trent Reznor of Nine Inch Nails announced on Monday that he's ditching his label, Universal Music, and many suspect that NiN will follow the lead of Radiohead (whose contract with EMI expired in 2003) and self-distribute its next album over the Net.

Meanwhille, Crave reports that two other notable (and unsigned) bands—Oasis and Jamiroquai—might give away their music on the Web, and Techdirt adds solo artist Will.i.am (of The Black Eyed Peas) to the list.

So, what's going on here?

How can musicians survive by giving their tunes away for free? One word: merchandise. Radiohead is essentially using the Web to turn the traditional music business model on its head—the music will (theoretically, at least) drive the sales of merchandise (such as T-shirts, posters, and boxed sets, such as the $80 LP and CD "discboxes" for sale on Radiohead's Web site) and concert tickets, rather than the other way around.

File sharing is encouraged (so bye-bye, DRM), while the big music labels are left out in the cold. As Will.a.am of The Black Eyed Peas said (as quoted by Techdirt), "the new distributor is your niece."

Also in the latest seismic shift to rock the music industry, pop superstar Madonna is close to leaving Warner Music Group Corp.'s (WMG) Warner Bros. Records for a virtually unprecedented $120 million deal with concert promotion giant Live Nation Inc. (LYV), according to people familiar with the deal.

The 10-year pact with Beverly Hills-based Live Nation would give Madonna a rich mix of cash and stock in exchange for the rights to sell three studio albums, promote concert tours, sell merchandise and license her name.

It's the type of sweeping deal that record labels have sought, since they can no longer expect to thrive on music sales alone in a world in which CD sales are collapsing quickly and sales of digital downloads are not yet making up the difference.

The fact that a concert promoter like Live Nation landed the deal rather than a traditional record label like Warner Music is a sign of how quickly the landscape is shifting in the cratering music industry.

Traditionally, acts like Madonna would release their recordings through a major record label and then make separate deals for touring and merchandising with other companies.

Now, however, all the players in the music business - labels, concert promoters and even managers and ticketing companies - are eager to make broad deals that give them a piece of the whole pie by participating in revenue streams such as endorsement deals between artists and advertisers, as well as the sales of concert ticket and merchandise.

Your "hum me a tune" scribe;
Allan W Janssen