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Don't miss lessons Radiohead, Trent Reznor offer

Their attempts to promote and distribute albums online without the backing of a major record company proved the labels do have value.

Musicians aren't merchants.

We certainly learned that through Radiohead and Trent Reznor's separate experiments with choose-your-price album promotions.

Trent Reznor of Nine Inch Nails Rob Sheridan

In October, Reznor, the leader of the band Nine Inch Nails, and Radiohead attempted to promote and distribute albums online without the help of a major record label. Both offered fans the opportunity to obtain the music for free. Both saw some success.

But they also illustrated that the music business is probably better left in the hands of businessmen. Musicians are not the new labels. Artists need someone to provide financial support and business acumen. If we end up ridding the world of labels, we'll only have to re-create them--in some other, probably more nimble form.

Last week, I interviewed Reznor about the online promotion of rapper Saul William's album The Inevitable Rise and Liberation of NiggyTardust. In that interview, Reznor said he was disappointed that only 18 percent of the more than 150,000 people who downloaded the album paid for it. He and Williams offered two options: pay nothing or obtain a higher-quality audio version for $5.

By backing Williams with his money, name, and know-how, Reznor essentially thrust himself into the role of a music label. That is, a music label with a lot to learn. The first lesson was that you don't always back a winner. A music company's fortunes can often rest on its ability to discover superstars. Profits generated by a few marquee acts have always kept the companies going while all the other performers break even or lose money.

EMI said this week that only 5 percent of its acts are profitable. This kind of prospecting requires a huge investment.

Reznor said he didn't get involved with Williams to profit, but acknowledged that he spent too much making the album and said he hasn't yet recouped his money. A record company can afford to make bad bets once in a while, said Chris Castle, a music industry insider who has worked as a vice president for both Sony Music and A&M Records. Musicians, even successful ones like Reznor, probably can't.

"Trent thinks that (150,000 downloads) is bad?" Castle asked. "I'll tell you bad. Bad is zero. Bad is when you spend $100,000 on marketing and tour support and you got nothing. Do you know how hard it is to go from a cold start and just get 1,000 people to listen to an album? Welcome to the music business, Trent."

Does that mean, gasp, that record labels aren't entirely evil? Well, maybe. Charges of musician exploitation and plain old bad taste aside, they certainly have a purpose. The music business is primarily about promotion, Castle said. You build name recognition through all sorts of methods: radio play, getting write-ups in music magazines, making sure a CD is prominently promoted in record stores. That takes money. Castle offered this example.

"Finding music at record stores has always been tough," Castle said. "If you go into a store knowing what you want, or you're a music aficionado, it's easy. For the superficial buyer it's harder. Those are the people that are going to be influenced by displays at end caps of aisles or the stuff that's featured at listening posts. You don't get that spot because you're a nice person. All that stuff is paid for."

"What's unsettling is that you can't help fall into a familiarity with what works and what has worked. As much as one structure of a record deal is unfair and how little you get is bad, there was some comfort in knowing that things would work, that things like promotion and marketing would work."
--Trent Reznor

Then there is all the heavy lifting to worry about. In the telephone conversation I had with Reznor, he sounded like a guy who had been working too hard. He said he poured 18 months of his life into helping make NiggyTardust. Not only did he put up his own money, he produced the album, performed on it, oversaw all of the business tasks right down to the writing of the text on Williams' Web site.

Artists who sign with a label don't perform these chores. Executives packing MBAs and years of business expertise do. Is that a good thing? Not necessarily, but that division of labor helps.

"I'm spending a lot more time being the business guy than the musician and I really don't like doing that," Reznor said. He found the role of record executive more difficult than he had expected.

"What's unsettling is that you can't help fall into a familiarity with what works and what has worked," said Reznor, who left Universal Music Group last year. "As much as one structure of a record deal is unfair and how little you get is bad, there was some comfort in knowing that things would work, that things like promotion and marketing would work."

It's not going out on a limb to say the current music industry business is broken and that's why the likes of Radiohead, Reznor, and Madonna as well as consumers are revolting against it, said Jerry Del Colliano, professor of music industry at the University of Southern California. Nonetheless, he said that companies like the labels are needed to help develop talent and help the public discover that talent.

"The labels aren't going anywhere," Colliano said. "They're just going to have different duties in the future."

What about Radiohead, you say? Many argue giving away the digital version of In Rainbows was a wild success for the British supergroup. The band hasn't revealed the album's Internet sales figures, but last week more than 122,000 physical copies were sold, making it the No.1 album in the U.S. Nearly everybody on the Web credited the online promotion for the booming CD sales.

But Radiohead is one of the world's best-known acts. The vast majority of musicians have more in common with Williams, a little-known rapper, poet, and filmmaker. Their name recognition, unlike the British superband, doesn't count for much outside a small, loyal following.

It's also interesting to note that Radiohead's manager, in an interview with The New York Times, said he doubted the choose-your-price promotion would ever work again.

Even so, Castle said Reznor and Williams shouldn't give up the good fight.

"I like Trent, I like his heart," Castle said. "So he shouldn't get down. He should get Saul on the road and keep him on the road touring. He shouldn't come off until they can figure out where his core audience is."

And who does all that? "If you're going to market someone, you're going to have to have a publicist," Castle said. "And you're going to have to have tour support, somebody to care about you while you're on the road."

Perhaps an old-fashioned record label doing all the behind-the-scenes work isn't the best idea for the future of music. But someone has to do it.