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Superstars are leaving major record labels

Published: Monday, Oct. 22 2007 12:23 a.m. MDT

LOS ANGELES — Prince freed himself from record labels years ago. Paul McCartney, Radiohead and Nine Inch Nails have followed. Now the Material Girl appears to be kissing her big-name record company goodbye for a cool $120 million.

Could U2 be next? Justin Timberlake? Coldplay? Do superstars even need traditional multiyear album contracts when CD sales are plummeting and fans are swiping tons of music for free online, or tuning in to their favorite bands via YouTube, MySpace and other Internet portals?

"There's a prevailing wisdom that many established acts don't need a record label anymore," said Bruce Flohr, an executive at Red Light Management, which represents artists such as Dave Matthews Band and Alanis Morissette and ATO Records, home to David Gray, Gomez and Crowded House, among others.

"This is the new frontier. This is the beginning of a new era for the music business," Flohr said.

Executives at the four major record labels would not comment on the record for this story. But several noted privately that their companies are still the best at artist development, promotion and physical distribution of their product — something even big acts can't entirely do without.

The four majors are Warner Music Group Corp., Vivendi's Universal Music Group, EMI Group PLC, and Sony BMG Music Entertainment, a joint venture of Sony Corp. and Bertelsmann AG. They accounted for more than 88 percent of all U.S. music album sales this year.

Still, some headliners are becoming convinced they have the clout to change the rules.

Madonna is said to be close to signing a recording and touring deal with concert promoter Live Nation Inc. after turning down an offer from her longtime label at Warner Music Group Corp.

Under terms of the new 10-year deal, Madonna, 49, would receive a signing bonus of about $18 million and a roughly $17 million advance for each of three albums. Live Nation also would have to pay $50 million in cash and stock to promote each Madonna tour.

Radiohead created a stir — and plenty of publicity — when the British rockers disclosed last week they would bypass signing a new deal with a record label and make their new album available online, letting fans decide how much they wanted to pay to download it.

Earlier this year, Paul McCartney signed with Hear Music, a startup label launched by coffee retailer Starbucks Corp. and Concord Music Group, rather than going to a major.

Even the Eagles are going it alone with their upcoming album, "Long Road Out of Eden." The group, which has sold more than 120 million albums worldwide, will release the album exclusively through Wal-Mart stores.

The trend had Nine Inch Nails frontman Trent Reznor exulting over being "free of any recording contract with any label" in a recent post on his Web site.

Music industry insiders say the bids for independence only make sense for the most popular acts or those with devout fans who fill concert seats, buy T-shirts and seek out their music.

"These artists are in the position to basically set their own rules and set their own course," said Ted Cohen, managing partner of media consulting firm Tag Strategic and a longtime record label executive.

"The game used to be really simple," Flohr said. "You get your record played on radio, you get your face on Rolling Stone (magazine), and you get on 'Saturday Night Live.'

"Now, it's you put your video on YouTube, you get your MySpace page happening, you do your deal with Facebook, you tour ... all these things add up, hopefully, to a successful record."

The music industry has seen a 14 percent drop in the number of CDs sold in the U.S. compared with the same time last year, according to Nielsen SoundScan.

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