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Case Study - Radiohead

Case Study - Radiohead

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Published by Sabeeh -ul -Hassan

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Published by: Sabeeh -ul -Hassan on Nov 30, 2010
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Radiohead's rainbow could signal danger for record giants
Sunday October 7, 2007The Observer 
 The group's decision to use the internet to release their new album is putting pressure on big music labels to adapt or die,writes Richard WachmanIs the bell tolling for the recorded music industry? Some commentators are saying as much following a decision by Britishband Radiohead to release their next album from their website, cutting out the record labels. Even more revolutionary, thegroup is asking fans to decide how much to pay for 'In Rainbows', available for download from Wednesday. A spokesman for Radiohead says: 'As you might imagine, offers are ranging from nothing to more than you might pay for a CD in the shops.'In part, Radiohead are asking: how much do you value us? But implicitly, they are also questioning how much people areprepared to pay to download music over the net. It's a question that music companies have been grappling with ever sincethe file-sharing site Napster was closed in 2001.Once again, the economics of the music industry is being turned on its head as artists take matters into their own hands.Haven't we already seen Prince sell 3m copies of his new album via a deal with the Mail on Sunday during the summer? LilyAllen, Arctic Monkeys and countless others have launched themselves via email or social networking sites such as MySpace.For its part, the public has been ripping the industry's conventional business model to shreds by illegally downloading musicfor years. Internet piracy and the switch to digital sales are costing the music majors millions: profits from EMI's music divisionplunged by £100m in the 12 months to March 2007. IFPI, the trade body that represents the music companies, has estimatedthat the global traffic of illegal CDs is worth £2.45bn. Around 20 billion songs were illegally downloaded or swappedworldwide in 2005/6. The organisation also reckons that more than one in three CDs is pirated.But it's one thing to conclude that the music companies are in trouble, quite another to conclude that they will shortly beconsigned to the dustbin of history. Mark Mulligan of Jupiter Research points out that Prince is using BMG/Sony to distributehis new album in Europe, but not in Britain, where the Mail was deemed to have done the job for him. Lily Allen and the ArcticMonkeys, after their internet launches, have signed to EMI and Domino Records respectively. Mulligan says: 'Many artistswant a record deal. What the net has done is allow new people to be recognised, but once established they don't want thehassle of marketing and distribution, which are the core strengths of the companies. At the other end of the spectrum,established groups such as Radiohead, which have been around for years, have a loyal fan base and can exploit the internetfor their own advantage.'But it's not a zero sum game. Radiohead's new album will still be launched conventionally in the new year. The group aretalking to a number of labels. Chris Hufford, Radiohead's manager, says the website launch is just 'another way of doingthings'. But Chris Parry, founder of Fiction records, says that the industry is undergoing a seismic shift. 'The music companiesused to have a monopoly when it came to finding new talent and distributing songs. Now artists such as Radiohead arebeginning to challenge the status quo. New technology has subverted the way the majors used to do business. The balanceof power has shifted from the companies to the fans and artists.' Ben Cardew of Music Week says: 'It's extreme to think thatmusic labels won't exist in 20 years time, although some people are talking about it. On the other hand, marketing,production, studio management and distribution are time consuming and many artists don't want the hassle.'Not everyone is comfortable with the power of the majors. A few years ago, Mick Hucknall of Simply Red said that internetpiracy was justifiably the record companies' problem, as major labels had ripped off artists for decades. Simply Red, oncesigned to Warner Music, have started their own label:simplyred.com. Hucknall complains that artists have to pay recordcompanies for the costs of their recordings and their marketing, but the majors end up owning the master tapes. He says:'Major record companies must reform. They have got too big for their boots. I think artists will break away from recordcompanies. I don't think artists will sign to major companies unless they own their masters.' Clearly, the internet offers theopportunity for artists to sideline the companies, but to date this hasn't happened on a large scale, although Radiohead andSimply Red have shown what can be done.Paul Lewis, acting editor of Music Week, says: 'It's hard to visualise where it's going to end. But the business is going throughchanges other than those brought about by the internet. Music is not as mass-audience as it once was - there are lots of other things competing for people's time: computer games, social networking, mobile phones. That is why some companiesare dropping the word music altogether and calling themselves entertainment groups.' The rights to live concerts,merchandising and broadcasting are increasingly a part of deals between companies and artists as the majors seekalternative revenue streams to offset a steep decline in CD sales. A different sort of contract was established in 2002 whenRobbie Williams set up a joint venture with EMI that saw the music company take a 25 per cent stake and a share of profitsfrom DVD sales, touring and other commercial initiatives, as well as music sales.

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