Madonna Defecting and maybe more

In another blow to the record industry, Madonna is poised to defect from Warner Music Group, according to a report in today’s Wall Street Journal.

The star, who first rose to fame with MTV, is about to sign a 10-year, $120 million deal with Live Nation, the Journal reports. That deal will give Live Nation the rights to sell three albums, promote concerts and sell Madonna merchandise, according to press reports.

The move comes the same week that Radiohead, now also without a major label, released its latest album online — and is letting consumers pay whatever they want for the tracks. Meanwhile, Nine Inch Nails parted ways with its label, Jamiroquai is mulling departing ways from its company, and Oasis is about to issue a Web-only single through its Web site.

The Journal’s Ben Worthen argues today that record labels’ distribution power is no longer as necessary in the Internet era.

While that’s clearly true for superstars, record labels serve other functions, including promoting and marketing new, lesser-known groups. If the labels’ business model does collapse, it’s not clear that up-and-coming acts will ever achieve the popularity and fame that allow Madonna and Radiohead to sell directly to consumers on a large scale.

At the same time, the record labels don’t help themselves on the public relations front — or the long-term business plan front — when they press court battles against people like Jammie Thomas, ordered to pay $222,000 after a jury found she uploaded 24 tracks to Kazaa. Populist support for the single mother is only growing since the verdict; freejammie.com, a site devoted to raising money for her legal expenses, had drawn more than $10,000 in donations since going live a few days ago.

Part of the rationale for Radiohead’s pay-what-you-want plan and Madonna’s deal with Live Nation is that much of the profits to musicians come from touring, and not record sales. Given that file-sharing isn’t likely to go away any time soon, the record industry would do well to refocus its energy on finding paths to profitability that don’t revolve around CD sales.

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