It seems some labels are beginning to acquiesce to the changes being forced upon their precious “traditional” music-industry business model. Coping with the possibility of losing their stronghold on artists and the multi-million-dollar-hit-machine, Universal Music Group and Warner Music Group are developing “online” labels. These labels will initially release music through popular sites and concentrate on developing a presence online. What is upsetting to me is that the labels are still trying to reason that their value-added services are more valuable than the artists’ contribution. Why else would they feel entitled to approximately 75% of royalties? Maybe I’m cranky because it’s Monday morning, but what the f*ck? Artists should not bow down, the labels need to finally get on their knees. Maybe the industry is finally ready for balance, wherein egomaniacal execs and artists realize they had a disproportionate amount of wealth handed to them because of their quasi-monopoly, not because they are geniuses or favored by the heavens. In the excerpt below someone asks something along the lines of how are we supposed to make a profit with 99cent singles? In my opinion the question hidden in that context is how are we supposed to maintain our fat-cat status and riches by selling so cheap? My answer this morning, accompanied with a slap in the face, is that maybe you shouldn’t have been that paid in the first place.

Music Industry Is Trying Out Digital-Only Releases (registration required)

Labels usually carry out global marketing campaigns that include several radio singles and music videos spread out over a year or more. How, executives ask, can they turn a profit if they spend the money to turn an unknown into a star and then only sell singles, which usually cost 99 cents each?

“The economics don’t necessarily work today,” said Bruce Resnikoff, head of Universal Music Enterprises. “But the economics of the business are constantly changing.”

To keep up with the shifts in where and how fans shop, the record companies are grasping for new approaches. As they move toward licensing their music catalogs to companies that plan to filter unauthorized material out of the free file-sharing systems, Universal has made a deal with one such company, Snocap, started by Shawn Fanning, the creator of Napster, the former file-sharing Web site.

Warner Music Group is developing a unit similar to Universal’s, initially to sign artists and finance recordings for online sales, with the potential for later CD releases. Mr. Gilbert of Universal said he came upon the idea for a digital-only label after getting to know a few Los Angeles musicians who didn’t have major-label deals. Mr. Gilbert said the effort provided a chance for acts whose music did not fall into the dimensions crafted by radio formats and music video television. Universal has signed acts including Rusty Anderson, a singer and guitarist who has played in Paul McCartney’s band; John Jorgenson, a guitarist for Elton John; and Parthenon Huxley, who performs with former members of the art-pop act Electric Light Orchestra. For the artists, the deals do have a downside. The company does not pay them an advance or cover the cost of producing an album. That part is up to the musicians, who finance their own recordings and in most cases have been selling their music – in the form of regular plastic CD’s – through their own Web sites or outlets like Amazon.

The artists retain ownership of their master recordings but license them to Universal for a limited time; if online sales of an artist’s music reach a certain point – around 5,000 copies of a particular song – the company has an option to pick up distribution of the CD to record stores.

Universal is paying the musicians an estimated 25 percent royalty on the retail price of the downloads, without taking the industry’s standard deductions for CD packaging and promotional giveaways, according to people with knowledge of its contracts. In exchange for the music, Universal is throwing its considerable muscle behind promoting the artists, including them in its own advertising and seeking to license their music to films and television shows. The company will also handle online marketing. The trick will be to “reach the next frontier of consumer, the consumer searching in the digital world,” said Mr. Resnikoff of Universal Music Enterprises.