Are Radiohead, Madonna, Trent Reznor Sounding The Death Knell For Major Record Labels?

The ease of releasing music digitally makes the old model seem obsolete — but don't count the big guys out just yet.

In 1993, noted audio engineer/ musician/ curmudgeon Steve Albini penned an article called “The Problem With Music,” in which he detailed the perils that await a band signing with a major label. It’s a fairly remarkable read, if only for the opening paragraph, an oft-quoted bit of vitriol and imagery that sums up the label courting process thusly:

“Whenever I talk to a band who are about to sign with a major label, I always end up thinking of them in a particular context. I imagine a trench, about 4 feet wide and 5 feet deep, maybe 60 yards long, filled with runny, decaying sh–. I imagine these people, some of them good friends, some of them barely acquaintances, at one end of this trench. I also imagine a faceless industry lackey at the other end, holding a fountain pen and a contract waiting to be signed.”

It’s been 14 years since Albini’s piece was first published, and it’s debatable whether things have changed for the better. Certainly, major labels are still portrayed as the Enemy, soul-crushing suits concerned with nothing more than the bottom line. Whether or not this is true, it bears mentioning that said bottom line is getting harder to meet by the minute — so much so that for the first time in memory, it might be possible to actually feel sorry for majors (if not necessarily likely).

The record industry is in a freefall, with annual album sales around half of what they were in the late ’90s due primarily to downloading — a situation that can only get worse. Then a trio of high-profile defections made headlines in the last few days: Radiohead eschewed “traditional” routes and released In Rainbows largely on their own (see “Radiohead’s In Rainbows To Be Released Digitally October 10 — You Decide The Price!” ); Trent Reznor declared his freedom from Interscope (then basically attempted to scuttle the label-release of his Year Zero Remixed album by promising to leak all the tracks himself); and Madonna is leaving Warner Bros. in favor of a big-money deal with concert promoter Live Nation that includes albums, concert promotion, licensing and merchandising. Needless to say, things are pretty rough for the majors these days.

In fact, one could ask the question: Do artists of a certain caliber even need major labels anymore? Couldn’t acts like Pearl Jam, R.E.M. or the Dave Matthews Band survive — and even thrive — on their own? And doesn’t the answer to this question (which seems to be an unequivocal “yes”) lead to an even larger one: Are major labels becoming obsolete?

The answer largely depends on who’s asking.

“I don’t envy the people at major labels,” said Danny Goldberg, the founder of Gold Village Entertainment (which manages acts like the Hives and Ben Lee) and former Nirvana co-manager, who was CEO of both Warner Bros. and Mercury Records and president of Atlantic Records during the 1990s. “They’re narrowing their business right now, and that’s what they might have to do. Their business is becoming a combination of catalog licensing — because they all have amazing catalogs — and the pop business. And there’s less and less room for anything in between. It used to be just [having a release] on a major label was a source of prestige and status, in terms of the way the rest of the business, media and promoters would look at a band. But because there are so many successful artists on their own labels or on indie labels, I don’t think that’s the case anymore.”

Jonathan Daniel, co-founder of Crush Music Media Management, which helms the careers of acts like Fall Out Boy and Panic! at the Disco, offered a more cautious assessment. “I think the world is changing so rapidly, it becomes less attractive to sign with a major label,” he said. “But it’s foolhardy for a young band to say, ‘We don’t need labels.’ You might not need a label in the traditional sense, but you still need people to help you get ahead. Plus, even though recording and touring are cheaper, there are still costs of doing business, and labels have traditionally always helped with that.”

Again, the situation depends on the artist. While the traditional major-label setup can benefit up-and-coming acts (who are largely unknown and can have their careers established by a major’s promotional muscle), it’s not going to be much help to a reasonably established band on its fourth, fifth or even 10th album — such artists usually know who their audience is and are less likely to break out beyond it. So in order for majors to survive — and for both new and old acts on their rosters to thrive — they’re going to have to change the way they do business.

“There already are massive changes [being made] at major labels,” said Bertis Downs, longtime manager of R.E.M. “The situation we’re finding ourselves in now is definitely not a surprise to anybody — ‘Oh my God, a major band can do this without us!’ I mean, [a major act releasing an album] is about the same as sending out e-mails. Labels are totally restructuring. They’re beefing up all the new-media stuff, all the digital stuff. I don’t think this is really this cataclysmic tipping point where, starting tomorrow, everyone’s going to start doing things this way. First of all, people are still in deals, people still have contracts, and it’s not like you can hit a switch and everything will change. It’s incremental.”

MTV News reached out to representatives at each of the so-called “Big Four” — Sony/BMG, EMI, the Warner Music Group and the Universal Music Group — for comment on just how their relationships with artists are changing. While no one would speak on the record, a spokesperson for one of the four noted (off the record) that majors are putting a lot of stock in “360 deals,” where a label partners with the artist in publishing, merchandising and touring revenue — not just sales of recorded music — in a sense saying that if the label is doing its job promoting an artist, then it should reap the benefits of said promotion across the board (similar to Korn’s deal with Virgin and the Madonna/ LiveNation deal).

The wild card in all that deal-making — and in pretty much everything — is technology. It’s no secret that labels have been struggling to find ways of making the Internet work for them. In the wake of what Radiohead has done, it looks like many artists are one step ahead: They’ve figured out that technology has given some of the power back to them. Why pay for production of an album when you don’t actually have to produce any physical copies? Or why have a label spend money on promoting a record — money that the artist must pay back before they can turn a profit — when you can use a MySpace account to do basically the same thing? If only it were that easy.

“I think the reason labels are under attack is because the barrier to entry used to be much higher,” Daniel said. “The Internet has lowered that barrier, for sure. But at the same time, it’s made it even harder to filter through. Part of the reason you sign with a label is promotion, because while the Internet can be a powerful promotional tool, it can be so unkind. Like the Pitchfork review of the second Jet record [that consisted entirely of a video of a] monkey p—ing into its own mouth? Or kids not liking a Yellowcard single [after the song leaked and met with widely negative reviews]? Both those things killed those records.”

“Technology has given power to the consumers. All we’re doing is following along,” Downs laughed. “The playbook is changing. [R.E.M's] new album is basically done, so if something comes along — whether it be MTV or Martin Scorsese — and they want to use one of our songs, of course we’re going to listen. But a year or two ago we would’ve said no, because that’s not by the books; that’s not the formula. You wouldn’t waste a song that early. Now, you’re trying to get excitement. You’re kind of making it up as you go along.”

The rules of the game seem to be different for everyone playing. Most agree that only a very select group of artists could do what Radiohead is doing, and that the In Rainbows situation is in no way a model of how to save the record industry. The overwhelming percentage of artists signed to major labels don’t have the critical and commercial clout of Thom Yorke and company.

How do musicians play the game and still manage to benefit from being on a major? By being more selective when it comes to signing deals — including the aforementioned 360 arrangements.

“It’s strange, because we work with a lot of bands on a lot of different levels,” Daniel said. “If an artist [sells] 2-3 million [albums], like Fall Out Boy, the label will make a lot of money and the artist will make money too. But we’re also paying attention to what happens with this Radiohead thing, because for a young band, we’re going to try to work deals differently with labels, because they’re pushing these 360 deals, where they incentivize everything. It’s their ‘new’ way of looking at deals, and to me, that’s not really reinventing how the business is. I’m more interested in looking at a new band like, ‘OK, the band is 100 percent of what it is, let’s divvy that up amongst people who can help the band. Maybe we give 50 percent to Oprah, and she puts them on her show and all of a sudden they’re big.’ ”

Perhaps the backlash Radiohead incurred following the release of In Rainbows sort of proves that all bands need a label to iron out the kinks and get CDs into stores, which, for all the shouts of “The sky is falling!,” still remains a very vital aspect of the record industry.

“It seems like [Radiohead's model is] disproportionately an online strategy,” Goldberg offered. “I mean, the high-end proportionality of digital sales is like 30-40 percent. And for older audiences, it’s something like 10-20 percent. So whichever place in that range Radiohead is, more than half of their audience is still buying CDs, and that half is fundamentally being ignored. So half of their audience is basically being told, ‘You know what? You’re just not important to us. We’re interested in people who get their music online, because they’re younger or hipper. And everybody else can wait until next year.’ And that can be offensive to a percentage of their audience. And that, to me, is a flaw.”

“Obviously [Radiohead] had some issues, some infrastructure and technical issues,” Downs said. “So there’s some advantage to being with a big institution — the scale and the servers and all that.”

But can the majors adapt? No one can be sure, but if there is one beacon of light out there, it’s probably the majors’ bread and butter: pop music. It seems that, to a much greater degree than their rock brethren, established pop and hip-hop acts (like Mariah Carey or Kanye West) need the strength of a major label to ensure big-time sales.

“[Major labels] are part of big corporations, whether they’re public or private, and they have obligations to investors for short-term results, so they have to make very hard choices, and those choices mean that they’re not able to work effectively on as many artists as they used to,” Goldberg said. “I don’t think there’s any question that majors do a good job with some artists. Kanye West, he’s probably better off in the major-label system. On his own, I don’t know if he’d be able to do what he’s done within the system.”

“I think when Nirvana broke, rock music blurred into pop music, in terms of sales numbers, and it never should’ve done that,” Daniel added. “Rock music was really always an underground thing. Major labels were built for pop music, and they really work. I don’t think Beyoncé could make records with the same great success without a major label. For a pure pop thing that doesn’t build its fans by touring or word of mouth, labels are great. But for bands, major labels become less important until you want to cross into the pop realm. … I don’t know, though. I think the bottom line is that it’s not easy to sell records.”