The dam's breaking open: first Prince released a record as an insert in daily newspaper. The Eagles went direct through Wal-Mart. Radiohead announced plans to release its new album without the assistance of a major label, and rumors about Oasis and a couple of other British bands followed.
On Monday, Trent Reznor posted a gleeful announcement that Nine Inch Nails' record contract had ended, and that he would be experimenting with direct distribution to fans in 2008. This isn't surprising, given that Trent recently told fans at an Australian concert to steal his music. Yesterday, the Wall Street Journal reported that Madonna is about to leave Warner Brothers and sign a $120 million deal with Live Nation, the concert promoter and owner of many large venues around the U.S. (Live Nation was spun out of Clear Channel when the radio giant got out of the concert business.)
The Madonna deal would be a little different than the do-it-yourself approaches being taken by Radiohead and NIN. Instead of no label at all, Madonna would actually be signing what's known as a "360 deal," in which her label gets a cut not only of record sales, but of merchandise and concert grosses. Only the "label" isn't a traditional label at all, but rather a company whose specialty is concert promotion. But the business model's probably going to be similar to the label-less acts: sell the album cheap, or give parts of it away, and charge a premium for the concert experience.
As I've said before, this approach might make sense for established artists, but if giving recorded music away becomes the norm, the road from local hero to rock star could be a lot harder. Beginning musicians tend not to have a lot of resources, and need a label (or some other backer) to help fund early tours. If labels have nothing to sell, who picks up the slack? Concert promoters and management agencies? Perhaps, but the economics are different--they can't rely on a highly profitable hit to fund the ten unprofitable artists still under development.
(Side question: can Madonna really play the guitar, as the picture in this article implies? Or does the soundguy turn her channel all the way down?)