Madonna, Radiohead Moves Rock the Music Biz
By Rob Brunner c/o Entertainment Weekly
October 2007

The Material Girl dumps her longtime label for millions, while the alt-rock titans let fans download their new album for free. A week of maverick moves could forever change the industry's tune.

One is arguably the biggest pop star of the last 20-plus years. The other is a quartet of pasty English eggheads given to song titles like ''Weird Fishes/Arpeggi.'' On the surface, they don't have a heck of a lot in common. But in a single week, Madonna and Radiohead just might have permanently transformed the music industry.

On Oct. 10, Radiohead, one of the world's most beloved, respected, and unpredictable bands, self-released their first new album in four years. (Capitol had put out their previous six discs.) The rabidly anticipated new album, In Rainbows, is currently available only as a download through the website InRainbows.com. When it comes time to pay, you'll encounter four short words that might come as a surprise: ''It's up to you.'' The album's price, that is. Five dollars? Your call. Ten? Sure, sounds good. Nothing at all? Hey, whatever works for you. ''I'm just glad everyone's hearing it at the same time,'' says Radiohead guitarist Jonny Greenwood. ''That was the point, really.''

He's being modest. Radiohead's sliding-price release is a potentially game-changing tactic, perhaps the strongest indication yet that the record industry will in fact redefine itself — in order to survive. The same day In Rainbows went on sale, news broke that Madonna will leave Warner Bros., her home of 25 years, to sign a reported $120 million deal with tour promoter Live Nation that will include albums, touring, merchandising, and licensing. That's right, Madonna is about to entrust her future to a company that has never sold a single album.

And it's not just Radiohead and Madonna. Lately it seems like fewer and fewer established artists want to be on traditional labels. On Oct. 8, Trent Reznor walked away from Interscope. Paul McCartney and Joni Mitchell — who between them have logged more than 80 years on major labels — released their most recent albums through Starbucks. The Eagles' new disc will be available exclusively from Wal-Mart. This past summer, Prince gave away his latest album with copies of a British newspaper, and Kinks frontman Ray Davies recently announced he's planning to do the same with his next disc.

All of which makes us wonder: Could these developments herald the eventual demise of the label business? Well...maybe. ''I think it marks the beginning of a new era in how record companies function, but I wouldn't call it the beginning of the end,'' says Liz Rosenberg, Madonna's longtime Warner Bros. publicist. ''For the last year or two it's become much more crystallized that everyone in the business has to explore new ways of being profitable. The combination of Radiohead and Madonna these last few weeks is a big shift.''

Of course, what works for major stars probably won't work for everyone. Few artists command the kind of respect and loyalty needed to succeed without label support. ''People called to ask me, Is [Radiohead's pricing] the new business model?'' says Eric Garland, CEO of Big Champagne, a company that monitors Internet music. ''And I said, Yes! It's a fantastic new business model. Step one: Be Radiohead. Step two...''

NEXT PAGE: ''Soon a lot of these companies won't define themselves as record companies. They'll define themselves as artist development companies. If you're involved in an entire career with an artist, then everyone's interests can be aligned.''

Even so, the strategy points to an undeniable truth: The traditional way of doing business is disappearing. Album sales continue to plummet (down 25 percent since 2000) — a victim, at least in part, of the illegal file sharing that has plagued the industry since Napster's 1999 inception. Record stores are shutting their doors, including once mighty chain Tower Records, which closed for good last December. There's even speculation that recorded music could turn into just another marketing device, a promotional tool rather than the key source of profit.

For bands like Wilco, that might work quite nicely. Though they do make some money on albums, most of their income is earned on the road, and they've been known to stream their albums online before they come out. ''With Yankee Hotel Foxtrot it just seemed like the simplest thing would be to let people hear it [for free],'' Wilco frontman Jeff Tweedy told EW earlier this year, referring to the album that the band initially gave away online in 2001 after Reprise rejected it. ''Because we wanted to keep touring, which is what we do for our livelihood. A lot of naysayers in the business would say, 'Well, Wilco would probably be selling a million copies of every record if they didn't have this liberal policy toward downloading.' I find the opposite to be true. I think that you really should spend time developing goodwill between yourself and your audience.'' And for many, the bond between artists and fans is stronger than ever. ''Consumers have never been happier,'' says Big Champagne's Garland. ''There's more music being consumed in more ways than ever before. We're spending more time with popular music than we ever have. So the clear losers here are major recording companies and traditional music retailers, who are very vulnerable.''

These days, the most reliable money is in still-healthy areas like touring, publishing, and licensing. Which is why, as intriguing as the Radiohead release is, the Madonna deal could end up being more significant. The singer's contract with Live Nation — which takes effect after she delivers one more new album and a greatest-hits disc to Warner Bros. — is a 10-year deal covering, among other things, at least three albums, all of her tours, and merchandise sales.

This sort of contract is known as a ''360 degree'' deal, where a single company gets involved in all aspects of an artist's career. They're becoming increasingly common (Korn and Robbie Williams signed huge 360 deals with their labels a few years ago), and many label execs believe that's where the future lies. ''Soon a lot of these companies won't define themselves as record companies,'' says Steve Greenberg, the former head of Columbia Records who now runs the independent record company S-Curve. ''They'll define themselves as artist development companies. If you're involved in an entire career with an artist, then everyone's interests can be aligned. If for some reason an artist winds up having an unsuccessful record career but a tremendously successful career as a songwriter or as a performing artist, I'm happy for them. I'm not happy if I only have [profits from] the recorded music.''

NEXT PAGE: ''I think it's irresponsible on Radiohead's part to take the position that they don't need a record company. Because it may work for a few artists who are hugely successful, but the large population of recording artists aren't Radiohead.''

Fear not, budding music moguls — labels aren't likely to disappear anytime soon. For most young bands, record-company promotional and marketing clout is still a crucial part of building and maintaining a fan base. ''Traditional record companies put money and passion into what they believed in, and helped take it out to the forefront,'' says Atlantic Records president Julie Greenwald. ''We continue to do that, to find the best music and put money, muscle, resources, and passion behind it.''

While that may be true, a growing number of young artists, including indie-rock band Clap Your Hands Say Yeah, Maroon 5 tourmate Sara Bareilles, and Grey's Anatomy staple Ingrid Michaelson, have launched solid careers without a label (and with help from MySpace). But that kind of success remains rare. ''I'm very lucky,'' says Michaelson, whose self-released ''The Way I Am'' has become an unexpected Top 40 hit. ''I don't think this is the end of labels. They have a lot of money. If they spend the right amount, get you in the right places, if the songs are the right songs...it's like the right cocktail.''

But Madonna's Live Nation deal is a wrinkle that could flummox some big labels. By breaking down well-defined boundaries between record companies, tour promoters, publishing, and other revenue sources, labels could open themselves up to a lot more competition. ''The Madonna thing is interesting because it's a major corporation that's not a record company saying that they're the whole dog, not just the tail of the dog,'' says Gold Village Entertainment CEO Danny Goldberg, who managed Nirvana and has run three labels. ''There's sort of a paradigm shift in terms of where the real driver of the business is. Now the live career is what's driving it all. But it's encouraging to me that an artist can still command a nine-figure deal, that they can still have that kind of career at this stage. It shows that the music business is still very healthy — even if the record business is going through a tough time.''

L.A. Reid is not happy. The chairman of the Island Def Jam Music Group — the man behind Usher, Kanye West, and Mariah Carey's comeback — thinks Radiohead are making a terrible mistake. ''I'm a huge Radiohead fan, love their music,'' says Reid, puffing on a cigar behind an imposing desk in his midtown New York office. ''But I think it's irresponsible on Radiohead's part to take the position that they don't need a record company. Because it may work for a few artists who are hugely successful, but the large population of recording artists aren't Radiohead.'' What especially irks Reid is the band's implicit devaluation of recorded music. ''To give away music is a huge mistake,'' he says. ''Because the music they make is amazing. They should charge more for their record. Because it's better! I think it's a horrible signal to send out. I'm a huge fan of their music, but I absolutely question their business acumen.'' (It should be noted that Radiohead are also selling a deluxe CD/vinyl set for about $80, and they plan to release a traditionally priced CD in stores next year.)

NEXT PAGE: ''MySpace is only about three years old. YouTube is less than two years old. They've fundamentally changed the relationships between artists and fans, and I couldn't have told you five years ago that I expected those things to happen.''

L.A. Reid represents an increasingly rare point of view, however. After years of institutional resistance to change, some label heads are now bowing to the realities of the digital age. On Oct. 5, new EMI chief Guy Hands sent out a surprisingly blunt memo written in response to Radiohead's pay-what-you-like pricing plan. The memo — which quickly leaked to the press — challenged EMI employees to find ways of capitalizing on digital music instead of stubbornly clinging to plunging CD sales. ''The industry has stuck its head in the sand,'' Hands wrote, criticizing what he sees as a culture of ''excessive expenditures and advances.'' Familiar criticisms, to be sure, but still shocking coming from one of the world's most powerful music executives. ''I think there've been some amazing people within record companies who have been awake to [the changing climate] for years,'' says Nettwerk Productions CEO Terry McBride, who oversees Canada's largest independent record company and recently gave away new Barenaked Ladies tracks online. ''What they haven't had was 'Let's go do it!' from the very top of the corporate structure.''

While nearly everyone agrees that the business is mutating, it remains frustratingly hard to predict what form that change will take. Columbia Records co-president Rick Rubin has been touting a subscription model, where fans could pay a monthly fee for unlimited access to thousands of albums. But really, nobody has a clue where this is heading. ''There will be new technologies we can't even imagine,'' says Martin Kirkup, who manages k.d. lang and Jamie Cullum, among others. ''MySpace is only about three years old. YouTube is less than two years old. They've fundamentally changed the relationships between artists and fans, and I couldn't have told you five years ago that I expected those things to happen. What I do know is there will be some great acts making great music.''

As for L.A. Reid, well, he agrees with that last part, at least. But it turns out this unusually savvy and successful exec's vision of the future is surprisingly...familiar: ''I hope it looks like it looked 20 years ago, honestly. It's really simple. The model for the future: Great music. Great artists. And people will buy it. There are many naysayers, analysts, and even artists and executives who have all pronounced that the record industry is dying. Well, I think they are the murderers. They are shooting bullets at the record industry, and they want to kill it. But guess what? It ain't dying. People still buy music. The difference is that people only buy music they really love, that is important or relevant to their lives, and they pay for it. They pay exactly what we charge. And they don't have a problem with it.'' But if you do have an issue with paying more for music? If you'd rather just download your favorite tunes for free? Well — to borrow a phrase from Radiohead — that's up to you.

(Reporting by Clark Collis, Shirley Halperin, Vanessa Juarez, Lori Majewski, Simon Vozick-Levinson, Margeaux Watson, and Chris Willman)

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