Madonna And Live Nation Change History

The music industry has grown accustomed to prophecies of doom over the past few years and news that Madonna and Radiohead have abandoned their former paymasters has bolstered the perception that the end of the major record label is nigh.

Madonna - the most successful female artist of all time - has ended a 25-year relationship with Warner Music in favour of a lucrative deal with Live Nation, a company that organises live events and owns several venues.

The deal follows the recent excitement around Radiohead's decision to ditch EMI and offer their new album for download with the consumer choosing what to pay - a move set to be echoed by The Charlatans.

Earlier this year, Prince gave away his new album to readers of the Mail on Sunday. Meanwhile, a slew of yesteryear's superstars, including Paul McCartney and Joni Mitchell, have signed record deals with Hear Music, which is owned by the coffee chain Starbucks.

It appears that artists of all calibres are forsaking the traditional route to fame and fortune in favour of giving music away and making money off the back of touring and T-shirts.

Arguably it reflects the way attitudes toward music have changed over the past decade, with today's consumers happy to pay vast sums to see a band but unwilling to pay for songs they can download for free.

Many of today's music fans - and artists - hold a very dim view of the music majors, arguing that they have charged too much for CDs for too long and that the dinosaurs of the industry were too slow to harness the power of the internet and the way the industry has changed.

All of this paints a pretty grim picture for major music labels.

David Pakman, chief executive of eMusic, which is the second-largest digital music service in the world behind iTunes, said that the largest music companies have lost touch with the consumer, particularly in the youth market where children can spend their money on video games or DVDs if CDs are too expensive.

"Major labels have dropped hundreds of artists over the past 10 years to focus on superstars. They no longer develop artists over long periods of time. But if those superstars are leaving the majors, what do they have left? " Mr Pakman said.

Yet music majors such as Warner Music and Universal Music may find the reports of their demise somewhat ironic given the accusations levelled at them earlier this month by trade bodies representing independent music labels.

In the wake of the European Commission's decision to green-light the 2004 merger of Sony and BMG, Impala - which represents 3500 independent labels - said that the four largest music companies control 95 per cent of the music that consumers hear. In the UK, Universal has been accused of "creeping dominance" after it acquired two struggling independent labels.

Despite the negative publicity music industry insiders are fairly sanguine about the so-called "earthquake" and "seismic shift" that the new business models represent.

As proof the gloomy headlines don't necessarily match reality. The source pointed out that Radiohead are locked in negotiations with a number of music majors to distribute physical copies of their new album.

Another point made by insiders is that established acts like Radiohead and Madonna are in a strong position to experiment with their content but the story is very different for new artists.

Warner Music could be the unlikely beneficiary of Madonna's latest move as she has to release one new record and a greatest hits package with the company, which will retain the rights to her back-catalogue.

Sources claimed Live Nation has offered Madonna a 10-year deal worth a staggering £60 million ($158 million) . The deal is for three records and includes concert rights and merchandising sales. The three albums would have to sell 15 million units each for Live Nation to break even, and, according to sources, Madonna has not commanded sales at that level since her 1990 Greatest Hits collection, although unofficial industry data suggests she has come close.

Despite the perception that the music industry has been broken beyond repair by digital piracy and the artist-power engendered by the internet, independent labels fear the future is bright for major music companies that could soon dominate the online sector.

The marketing power of the two largest labels has led Alison Wenham, head of UK independent music label trade body AIM, to complain to the Office of Fair Trading that Universal's recent acquisition of V2 and Sanctuary is anti-competitive.

Universal Music, the world's largest music company, recently reported a 50 per cent rise in its digital sales. Its acquisition of Sanctuary was driven by its investment in a "360-degree model" where the record label also manages an artist, participates in organising concerts and selling merchandise.