My record company, Avant Garde A Clue, Inc. is a digital-only label. We secure the digital rights to our artists' music for itunes and other sites. Some of the bands on the label are myself John Romano, Jaime Paxton, whose music has been featured multiple times on MTV's "Laguna Beach" and Big George Webley, whose record "Handbags and Gladrags" is the song you hear at the beginning and end of the original, British version of "The Office".
Since we don't print up cd's anymore, we have no problem with our artists putting music out in physical form with other labels or independently. This allows us to pay a very high royalty rate on digital sales, while still being able to offer guidance to bands and singers.
It has been reported over at Motley Fool that "Legal digital downloads are extremely high-margin products for music companies, since they don't incur manufacturing or distribution costs.", but keep in mind that the marketing costs to break a band are unbelievable. Then add in how many songs are poached on illegal download sites and the majors are in a tough spot.
The cure in three steps:
1. Toughen up the laws and ease the processes for shutting down illegal download sites. In the case of illegal downloading, it is quite obvious at this point that yesterday's Napster became today's Grabster and will be tomorrow's Blabster or Hamster, and so on. The point being that sites offering mp3 downloads should bear the full burden of the legality of the products they are offering. Forget about which server or country is offering the media. If a company offers copyrighted music for free that they don't have the rights to they should be shut down immediately.
2. Make mp3's the standard way to sell music: I love Apple and itunes, but songs need to be in the unrestricted mp3 format. If illegal download sites were shut down, do record companies really want to stop kids from sharing a hot band that they discovered? The answer is no way. Sharing between friends is highly important and encouraged by all record companies.
3. Offer coupons for mp3 players: If I were running EMI or BMG my main goal would be to get a mp3 player into the hands of every human being on the planet. Think of this; Buy 10 cd's (digital or physical), send the receipt to BMG, get a $25.00 rebate on ANY mp3 player.
Long term where can this all go? Imagine going to see U2 or me John Romano (ha ha, hey, I do put on a great show) and the next day downloading the show from itunes. Better yet, include the cost of the download in the concert ticket. Physical cd's will die and eventually become like the tapes you see at roadside truck stops. The ultimate vision of the music business is music companies will actually partner with bands, paying smaller advances but allowing artists to make more money in royalties.