Despite criticism by Irish band U2's manager Paul McGuinness over Radiohead's method for releasing In Rainbows last October, U2's lead singer Bono has published an open letter in NME disagreeing and applauding Radiohead for the album and how it was released. McGuinness told the BBC in early June that the method was "a failure and backfired" because "it still resulted in over 60%-70% of listeners acquiring the album through illegal channels."

Bono's letter to NME, printed in last week's issue, takes a sharp left turn from his manager's opinion, calling Radiohead "courageous and imaginative in trying to figure out some new relationship with their audience." Bono also remarked how "blessed" he feels "to be around at the same time" as "a sacred talent" like Radiohead. U2 have recently taken steps to reach their audience, joining forces with Live Nation Inc. (NYSE: LYV) in a deal that will market their music and concerts with related products from one location.

U2 is still signed to Universal Music Group for the band's record releases, which may have been one reason McGuinness came out against the method Radiohead used last year. Neverthless, the disagreement between manager and lead singer is insignificant compared to the applaud Radiohead continue to receive from fellow artists. Trent Reznor of Nine Inch Nails, a band that was also signed to Universal Music Group, has also come out in support of Radiohead's method, even though he, too, took issue with some aspects of it. Reznor has since released two NIN albums the same way.

According to U2's manager Paul McGuinness, the revolutionary and landmark method English band Radiohead used last fall to release the album In Rainbows was a failure and "backfired." Talking to the BBC, McGuinness critiqued the band and the "pay-what-you-like" method because it still resulted in over 60%-70% of listeners acquiring the album through illegal channels. He told the BBC that U2's forthcoming new album, due this fall, would not be released in a similar method at all.

The primary reason U2's album will not be released like Radiohead's In Rainbows, is probably because the Irish quartet is still contracted with Universal Music Group for album releases. Radiohead released In Rainbows without the assistance of a record label or any firm of the music industry. Their management and the band's website was utilized to oversee the release of the album. Perhaps McGuinness realized how much would be required for him if U2 chose that method? The new U2 album is due near the end of October, regardless.

McGuinness also told the BBC that physical sales "are still an enormous part of [U2's] business and [the band] still sell a lot of actual CDs." Although Radiohead did not release In Rainbows on CD in the beginning, when the CD appeared in January it went straight to number one in various countries, including the United States and the United Kingdom. The band has still not revealed exact figures from the experimental method, but that has not kept other groups and critics from analyzing it, including McGuinness. The U2 album will likely sell well, but that shouldn't mean that a download-only method initially was a failure.

In a keynote presentation at the Music Matter conference in Hong Kong today, Billboard reports U2's longtime manager Paul McGuinness called for Internet service providers to stop "clinging to the past and preventing the music industry's future growth." He feels that ISPs and the music business should have "a real commercial partnership" where revenues and profits are "fairly shared" and actively prevent copyright infringement together. This is not the first time McGuinness has called out ISPs for detrimental actions toward the music industry. He used another keynote speech in January for this same theme: that ISPs work against the music industry by providing safe harbors for users who share music illegally.

In McGuinness's opinion, the music industry is charting a "way to the future" but the kind of future he describes is not too different from the music industry that caused piracy to become such a problem. Instead, he calls "Internet free-thinkers" today's business "dinosaurs" because they hold an apparently appalling view of copyright management. Above the lofty goal of eliminating piracy, these words still sound greedy and money-based before anything else.

It's the same old problem for the music industry and the managers of the artists in that business. The average consumer just wants an easy way to obtain and enjoy the product. Unfortunately, piracy has provided that method and only recently has the music industry started to understand and rethink business methods to combat the issue. McGuinness is at least correct in stating that artists should not be simple employees, but if their product is better managed by other methods, then why not leave the music industry behind? Touring promoter Live Nation (NYSE: LYV) is obviously charting a path outside the industry that is very lucrative for artists and their management. U2 recently signed a deal with the company for this very reason.

According to the BBC this morning, Irish rock band U2 have signed a 12-year deal with Live Nation, Inc. (NYSE: LYV) on top of the band's deal with Vivendi's Universal Music Group. The deal will see the band consolidate previous arrangements and connections with Live Nation and includes merchandising, digital, and branding rights. U2 follows Madonna into an extensive contract with Live Nation, although record releases were included for Madonna.

Financial arrangements between U2 and Live Nation have not been disclosed, but it would not be surprising to see the band enjoy a similar deal to Madonna, who reportedly signed for $120 million over 10 years. Both deals are part of a larger trend of so-called "360 degree deals", according to the BBC, where artists "combine their recording, publishing and touring revenues." U2's lead singer Bono told the BBC as well that U2 and Live Nation had been in a "relationship for 20 years" so the new deal has been a long time coming.

U2's move is quite unsurprising given the latest trends for artists, but it should be noted that record label Universal retained a relationship with the band. As previously stated, Madonna's deal included Live Nation taking charge from Warner Music Group (NYSE: WMG) to release her new albums (after the upcoming release). The fact that Universal was able to keep U2 in some degree means that either a larger deal for the release of albums was already in place, or the record labels are seeing the shift and making amends to keep artists in traditional outlets.

Rumors now frequently circulate about massive music acts leaving their long-term record labels. Last spring Paul McCartney defected from EMI after 45 years to join Starbucks' (NASDAQ: SBUX) Hear Music label. Madonna left Warner Music Group (NYSE: WMG) last fall. Other artists have followed suit, while some who are still signed have started speaking out against their labels. In this most recent case, Irish rock band U2 is rumored to be leaving Vivendi's Universal Music Group to sign up with Live Nation (NYSE: LYV).

Although I wouldn't blame the artists for leaving their labels, as long as it is in their best interests and increases fans accessibility to the music, it is certainly going to affect the record industry long-term if the defections continue. At the same time, many critics and bloggers would point out that the acts switching labels are already past their prime -- their big hits and money-making lies with albums that came while they were at the labels. That may be true for acts like McCartney, U2, and Madonna, but the best example of this -- Radiohead -- is hardly through making the huge hits they enjoyed while with a major record label.

Radiohead, if you remember, is that "little" band that caused such a stir last October when it decided to release its new album, In Rainbows, to fans in a pay-what-you-want model. When the album was released on CD earlier this year it hit #1 in numerous charts around the world.

Obviously, none of these acts would have achieved such huge successes without major record labels, and it is impossible to say that the future of the record industry is without music labels. These rumors and the actual occurrences indicate that companies like Live Nation and Starbucks, while not necessarily oriented primarily for music distribution, are making better gains than the labels. This will not be ignored for long so the rumors may cease, and only indicates the movement music acts are making for the time being.

The buzz in the music world lately has been about Paul McGuinness, the manager for Irish rock band U2, and his call for Internet Service Providers to immediately disconnect users for downloading music illegally and for governments to enforce those new policies. Though the plea is rooted in good business for artists, every interpretation of it and reporting about it seems to focus on the money and paints music artists as greedy. More ominously, it makes it seem that artists and the managers who promote them have lost faith in their core support system: the fans.

McGuinness called for an end to ISP negligence by urging artists to fight against the "shoddy, careless and downright dishonest way they have been treated in the digital age." He placed the blame on the record companies as well, due to the "lack of foresight and planning" that has "allowed a range of industries" to rise and give people the opportunity to steal music. He also pointed to computer companies for creating new methods of stealing and governments for allowing ISP's to wash their hands of the illegal trading done via their services.

It's important to see that this call for ISP's to take a stance and do something is growing in popularity, but too often the calls just come out in the wrong manner. As the record industry and the music labels work to transition into new models of making the digital business work, even though they are severely late in doing so, this call will not stop illegal music trading. Just because consumers and fans use the internet to trade now does not mean it is a new phenomenon. Bootlegging has been around as long as the record industry and still continues outside the file-sharing problems. It may not be as large as it once was, but indicates that consumers will find alternate methods to trade music outside the legal system.

The big music publishers have always thought they should get better royalties from Apple (NASDAQ: AAPL) iTunes, and with good reason. Their CD sales are diving as music downloads online grow and, in the case of illegal downloads, they get nothing.

Vivendi Group's Universal Music division appears ready to make a stand. The world's largest music publisher informed Apple last week that it will not take a standard one-year renewal with iTune. Rather, it will make its music available ad hoc. Vivendi has several big artists on its label, including U2.

While Universal could get into a nasty fight with Apple that it might no win, the music publishing industry cannot watch its revenue drop forever. Apple might consider blocking Universal's content, but that could lead to an antitrust showdown. Universal's artists might object to a deal that brings them less money.

But, Apple cannot afford to have several publishers follow Universal's lead.

Makes things a wee bit tense.

Douglas A. McIntyre is a partner at 24/7 Wall St.

Following on the success of the previous iPod U2 Special Edition, Apple today announced the launch of the new iPod U2 Special Edition. 

The iPod U2 Special Edition is functionally identical to the 5th generation iPod (7,500 songs, 25,000 photos or 75 hours of video) but features a black stainless steel enclosure, red-click wheel, and the engraved signatures of U2 band members.

MSRP of $329, iPod U2 Special Edition purchasers will also have access to 30 minutes of exclusive U2 video content direct from the iTunes Music Store.

The previous iPod U2 Special Edition was based on the 4th generation iPod and was discontinued October 12, 2005; coinciding with the arrival of the 5th generation iPod.