As an Activision Blizzard (NASDAQ: ATVI) shareholder, I'm extremely gratified by the unqualified success of the Guitar Hero franchise. However, I'm none too happy about statements made by Warner Music Group (NYSE: WMG) CEO Edgar Bronfman Jr. who believes that Activision Blizzard should be paying more to license the songs. When I first heard about that, I admit, I became a bit worried. After all, if the publisher has to pony up a higher amount of cash to the music industry, then there could be pressure on the stock.

Well, I'm glad I caught a blog post by Eliot Van Buskirk for Wired over at Portfolio.com. Looks like Activision Blizzard CEO Robert Kotick isn't taking too kindly to those in the music industry who suggest his company needs to share a higher percentage of the spoils. He basically told Bronfman Jr. to chill out, suggesting that the impact of his software platform on music sales for artists that are contained within it almost argues that the publisher shouldn't pay a dime to the music industry.

The shareholder in me says "right on, Bob!" In this digital age, the music industry needs all the help it can get in promoting its artist roster. Gone are the days when consumers opened their wallets for physical CDs. That aspect of the music industry is dying in favor of the iTunes model that powers Apple (NASDAQ: AAPL) and its iPod empire. Therefore, I agree with Buskirk's assertion that the boat shouldn't be rocked here. Music companies should just accept the licensing structure as it exists, look at it as a loss leader if they feel that's what it is, and just be satisfied with the ancillary promotion they receive.

It's been almost a year since Sony Corporation (NYSE: SNE) launched the music downloading platform Platinum Music Pass in direct competition with Apple Inc. (NASDAQ: AAPL)'s iTunes Store, the largest and most successful downloading store. In the months since the program was announced and first released, it has not been reviewed very favorably. Nevertheless, this user found it very exciting and an inventive way to combat declining music sales based on CD profits and the strong grip store's like iTunes have on the market.

When it was released, critics and industry "pros" derided the credit card-like download albums as a step backward (you could easily download an album from iTunes without the cards), overpriced (the set price of the cards is $12.99), and a complete misstep in a market and economy obsessed with environment-friendly products (the cards are only available from physical retailers). Nevertheless, and these problems aside, the cards do offer those music listeners who are shopping for groceries or out buying other goods the chance to buy a downloadable album without the hassle of the CD.

Critics overlooked the mass appeal and sale capability of the cards in grocery stores and other stores since the target groups are not listeners who go out to simply buy an album, etc. Additionally, the platform only offers music from Sony's artists, which limits its catalog capabilities, but it does offer the highest quality MP3 tracks at 320 kbps MP3. By comparison iTunes's music files are generally 128 kbps in the regular store and 256 kbps in the iTunes Plus store.

British band Oasis have reportedly signed a new record deal with Sony BMG Music Entertainment via the band's own record label Big Brother Recordings. Big Brother will release the band's new material while Sony BMG, a joint venture of Sony (NYSE: SNE) and Germany's Bertlesmann Media Group, handles distribution of the new album and the band's back catalog in all markets, and the two companies will share profits. Music newspaper NME additionally reports that all signs indicate the first album as part of the new arrangement will be released this fall.

The band has been associated with Sony BMG in some form or another since its first album was released in 1994. Creation Records, the band's first label in the United Kingdom, handled distribution and release there, while Sony handled the same duties in other markets, including the United States. When Creation folded in the late 90s and Big Brother was set up, the same arrangement was kept. The band's last album of new material was released in the U.S. by Sony BMG's Epic Records, while the band's final album under the old contract, a "best of" compilation, was released by Columbia Records.

Oasis' management reported that the band is excited about the deal and the prospects that it gives the band in "building on the band's already considerable international success." The band's management reported that the new deal "allows the band to take advantage of all the opportunities presented by the new business models available today as well as remaining totally in control of their own destiny." Other band's at the same level of international success as Oasis, like Radiohead or Nine Inch Nails, have pursued different business methods than more traditional record labels.

British rock trio Muse revealed to music newspaper NME Friday that the band's new material may be released more "organically" in the future, versus reserving it for an album release. This idea of taking the "album" out of the equation is something that many bands have been quoted as saying in the last couple of years, most notably Radiohead. Drummer Dom Howard is quoted as saying that the new methods of digital releasing and downloading "presents a canvas to do whatever you want and just release music as and when it is ready to release," that is, more organically.

The new "canvas to do whatever you want" should not indicate that Muse (or any other band) is "against the concept of releasing an album in the traditional format." Howard maintains, "If we group a bunch of tracks together, it's because they're meant to be together as a unit." The new formats are most exciting for new listeners and consumers, in Howard's opinion, since they do not typically purchase an album on CD. Despite Radiohead's success at releasing an album solely via the internet (and for free), Howard also denied that Muse would duplicate that method. He and his Muse bandmates just remain open to new ideas for the music industry.

Organically released music would make more sense in the market as it grows closer and closer toward single-track downloads. The most obvious case in favor of releasing music as soon as it is ready is Coldplay's recent free download of single "Violet Hill" in support of the band's new album. While it was not released as soon as it was ready and was intended to directly promote the album, it did enjoy high downloads and put word about the band, the band's return, and the new album out there rapidly and well in advance of the album's release next month. Singles did not originally correspond directly to albums, so why shouldn't the music industry return to that idea?

Napster (NASDAQ: NAPS), a music-download service, reported Q4 and full-year results on Wednesday. I must admit, for a very low single-digit stock, the results seemed pretty cool.

For the fourth quarter, revenues increased about 6% to $30.8 million and the net loss for the quarter came in at $0.10 per diluted share; this was much better than the loss of $0.20 per diluted share seen in last year's comparable quarter, which also included $0.03 attributable to discontinued operations. Briefing.com says this performance beat Wall Street's expectations by three pennies. For the full fiscal year, the top line increased a nice 15% to $127.5 million and the bottom-line loss was $0.38 per diluted share versus a net loss of $0.85 per diluted share in fiscal 2007. Perhaps even more important is the fact that Napster is, according to the release, generating positive cash flow, an achievement the company has kept up for four quarters now.

Of course, the big story this week is Napster's attempt at upping its game against competitors such as Apple (NASDAQ: AAPL), Wal-Mart (NYSE: WMT), and Amazon (NASDAQ: AMZN) by opening a music-download site dedicated to the sale of MP3 tunes (I wrote an post on the subject, and so did Richard Driver). This is meant to broaden the company's appeal by going after consumers who don't necessarily dig the subscription model. I'll tell you, though, it's going to be a long while before Napster supplants the dominance of the iTunes store.

While privately-held EMI Group announced plans yesterday to cut around 2,000 jobs worldwide, the company also announced intentions to allow corporate sponsors to brand artists. According to British music journal NME, the plan will encompass connections to new releases from such large name acts as Coldplay, Kylie Minogue, and Babyshambles. This announcement coincides with several comments from EMI acts that they intend to withhold pending releases from the company until assurances can be made about marketing and digital promotion. Radiohead reportedly left EMI after assurances in those areas were not made by the record label, and when the company balked at giving the band rights to its back catalog.

A move like this should not be surprising, especially considering that other media and entertainment outlets have long used promotions of this sort to sell new products and releases. Most prominently are the deals film studios make for product placement and tie-ins with new films. Last year's Transformers comes to mind more than any other recent film in that regard. But where it is easy to insert a car for product promotion into a scene, the same cannot be said about music. Although it is unlikely Coldplay will start to sing about some new model car about to be revealed, the amount of control that artists may lose is daunting. The basic amount of attachment artists have toward albums seems to make this kind of deal unmanageable. If it is Britney Spears though, who would want to attach their brand to her at this point?

Unless the promotion is for some brand of musical device or instrument, this arrangement just seems hard to manage and especially hard to sell to artists that are very willing to withhold albums in light of issues already out of their control.

Amazon.com (NASDAQ: AMZN) and Sony BMG, a joint venture of Sony Corp. (NYSE: SNE) and Germany's Bertelsmann Media Group, announced yesterday that Amazon's new MP3 store will soon carry the label's entire catalog. This move makes Amazon.com's MP3 store the only digital store to offer consumer's Digital Rights Management-free MP3 tracks from all four major labels, with Sony BMG joining privately-held EMI Group, Warner Music Group (NYSE: WMG), and Vivendi (OTC: VIVEF)'s Universal Music Group.

Previously, Sony had announced a new promotion of album cards, which would allow listeners to download DRM-free MP3s, but it was limited to only about three dozen albums. The new agreement brings the entire catalog to Amazon.

The major point here is that Amazon's store now offers tracks that are playable on virtually any platform or device, from Microsoft (NASDAQ: MSFT)'s Zune and Apple (NASDAQ: AAPL)'s iPod to various off-brand players. In a press release given to Ellen Livshin of OutCast Communications, Amazon.com Vice President for Digital Music Bill Carr revealed this very fact: "Our Amazon MP3 customers will be able to choose from a full selection of DRM-free music downloads from all four major labels and over 33,000 independents that they can play on virtually any music-capable device." U.S. Sales head for Sony Thomas Hesse echoed these sentiments and added that the label is "excited to be working with Amazon as they continue to build new markets for digital music."

I've remarked before that the Amazon.com MP3 store would increase competition and drive the digital market forward, and with this announcement it seems that many predictions about the online music realm are being realized, albeit much earlier than expected. Many had pointed to mid-year as the time when DRM technology would disappear completely, but as we can now see, that timeline will be January, at least for one store.

The move is also a potentially devastating blow to Apple's iTunes Store, which had headed up the move away from DRM but has not great success, managing to score only the EMI catalog early last summer. Whatever the case may be, the Amazon.com move will increase the competition and hopefully begin the revitalization process the music industry needs. All they have to do is promote it and get consumers interested.

In the United Kingdom, retailers have "urged the music industry to drop piracy protection for online downloads after new figures showed the average Briton has bought fewer than three digital tracks in the past three years" according to the Financial Times. The Entertainment Retailers Association also states that anti-piracy methods have inhibited growth in the digital market and are "working against the consumer interest." The three tracks in three years figure is slightly hard to believe, but another point in the article made me think about the upcoming holiday season and digital music players.

The Financial Times remarked that the ERA is urging the music industry before the Christmas season because hopes are that digital sales could grow tremendously in January for consumers that want to load up their new players. While the average user might not be able to tell the technological benefits of Digital Rights Management (anti-piracy) free tracks, they can certainly enjoy the ability to easily transfer said track without having to worry about the tedious protection measures. Unfortunately, anti-piracy protection seems to inevitably require the consumer to sign in and confirm purchases, no matter the length of time since it has occurred.

DRM-free technology (anti-piracy) software has come under fire since February when Apple Inc.'s (NASDAQ: AAPL) Steve Jobs challenged the music industry to drop usage of the technology. So far the challenge has only been partially successful with London-based EMI the only music company to fully drop DRM and offer higher quality tracks for sale in various digital stores, including iTunes. The other music companies have not been as quick to adopt a DRM-free position, with Universal Music Group the only other label even beta testing files without it.

The record loss in credits markets since August is dampening plans by music companies EMI and Warner Music Group Corp. (NYSE: WMG) to refinance debts and provide dividends to shareholders, while "reinvesting in core operations." The company's plans come at a time when the music industry is dealing with sharp declines in CD sales and the continued problems in the face of widespread digital growth, according to the Financial Times. Unfortunately, neither company is rumored to be pressing ahead with the plans. WMG stock has fallen nearly $20 in the past year according to the same report, a trend that could certainly welcome a boost.

These rumors come at a time when similar rumors have been announced that EMI wants to cut funding to trade groups like the Recording Industry of America, which work against piracy, and issue that the industry has been dealing with for a number of years. This plan hopes to benefit from the back catalogs of major artists and the potential future catalogs those artists will produce. The Financial Times notes "the steady revenues generated by music publishing have become increasingly prized by investors at a time when the future of the more glamorous recorded music business is uncertain." The major reason cited for that uncertainty is the industry's inability to create digital sales to replace missing CD sales.

In the end, the credit problems these companies face only indicate that new business models are needed. Luckily EMI seems to be leading some kind of change in the current model, after dropping the use of anti-piracy software in media files last April. If major retailers start to cut back on space allotted to CDs, which is another prediction the Financial Times quotes, the industry could face even more setbacks. Frankly, an expedited move toward the digital market is needed to offset a number of these problems, but that is going to take a major wake up call and changes in the credit market may serve as a needed rough shake.

A new report indicates that worldwide music sales will drop some $5 billion by 2011. The 18-page discussion of music sales also indicates that the drop from $31.8 billion last year to $26.2 billion four years from now will also play out in U.S. sales, with a $2 billion drop occurring. The loss is attributable to "plummeting CD sales" and "faster-than-expected declines in sales of physical recordings in key markets."

In reality though, such a loss should not be unexpected. Digital sales are simply less expensive than physical sales and as a result of other high commodities more accessible. Digital growth has taken off this year, following EMI's drop in use of Digital Rights Management technology, which prohibits the piracy of downloaded media files. Of course, the big news and more long-lasting growth was Radiohead's decision to initially release their new album online, DRM-free, and giving fans the option to pay what they want.

The true discussion should be, and in some sectors is, the value of music. Some say Radiohead has lowered that value, while others argue that music is a freedom all consumers should not have to pay extravagantly for. But if, in four years, this report becomes a reality, rather than a prediction, we should be ready to blame the record industry for failing to adapt to the changing market as swiftly as it should have. Consumers deserve the "pay as they want" scheme because it adds a level of excitement (and concern) to the industry that was not there two months ago.

Radiohead continues to take its own music industry path, with the news this morning that the U.S. release of its seventh album, In Rainbows, will come through a record label set up by the band -- TBD Records. As previously reported, the album will arrive at the very end of 2007 in international markets, with the U.S. release date two days later on January 2. (Please see my comment for updated status of this information.)

Of course, In Rainbows is more famous already for the stir it created when Radiohead announced in early October that the album would be available as a download-only for the time being. Fans who passed on the download will now have their chance to buy the CD. A spokesperson told Billboard that the meaning of TBD is attributable to the fact that the band and ATO Records, who are distributing the release "ran into trouble in trying to clear all previously discussed potential label names." Although it seems clear that a reference to the moniker "to be determined" would not be too far off the mark.

Radiohead may have been taking revolutionary steps with the release of In Rainbows so far, but this move is nothing new. Bands since the 1960s have created their own record labels: The Beatles and Apple Records, The Rolling Stones and their creative Rolling Stones Records label. Even their 1990s brethren have started labels to manage their own music -- Oasis started Big Brother Recordings in 2000. At least Radiohead is taking the necessary measures to keep control of their music and their label, or so it seems. The Beatles and the Stones may have not had issues with EMI managing their material, but Oasis has reportedly been unhappy with Sony BMG's control over its music and label.

With the news this morning that Madonna is potentially leaving Warner Music Group (NYSE: WMG) for tour promoter Live Nation (NYSE: LYV), the future of the record industry is again being questioned. In the wake of English band Radiohead's self-release online of its seventh album, any move away from the record industry is demanding notice. A move to a tour promoter with album and merchandise opportunities only gives artists more control over their product, as opposed to making numerous deals with separate entities.

The Wall Street Journal's article cites that "a range of players in the music business -- labels, concert promoters and even managers and ticketing companies -- are eager to make broad deals that give them a larger piece of the pie by participating in revenue streams such as endorsement deals between artists and advertisers, as well as the sales of concert tickets and merchandise." That very sentiment spells doom for the record industry as the "newer" entities that enter the album-making business make offers that are often better than the deals the record labels offer.

The possibility of Madonna moving from Warner Music is only the most recent in a long line this year of successful artists moving from the big labels, but so far the question has revolved around embracing new technologies like the digital market. Paul McCartney shook up everything back in March when he moved from the Terra Firma-held EMI to Starbucks' (NASDAQ: SBUX) Hear Music, seizing on a market that had primarily been used for selling compilation CDs. McCartney's Memory Almost Full sold extremely well and catapulted him into the digital world. Radiohead's In Rainbows is this year's other strong case, though exact sales numbers are not available yet (however, the album's download site did get overloaded yesterday).

But the problems that face label groups like Warner and EMI are not limited to those companies. The entire business model for the music industry is being redrawn and recreated, but not by the labels. As the cases of Madonna, McCartney, and Radiohead illustrate, the artist is taking control of an industry that has long abused its power.

Guy Hands, the Terra Firma executive, who is now the "top executive" at EMI, recently warned staff that record labels need to let the CD go and embrace digital "opportunities" if the industry is to survive in the expanding market, according to a report by Billboard. Terra Firma is a private equity firm based in London that succeeded in buying out EMI in late July and since then both EMI and Terra Firma have been quiet about the direction EMI would go in any business model.

Citing the recent move by Radiohead to take their music directly to the fans (Radiohead was previously an EMI "act"), Billboard reports that Hands "proposed labels act more like venture capitalists" taking both profits and losses from artists recording and touring -- in direct opposition to the standard model of paying artists up front for album production. If that becomes operating procedure, EMI's move in April to discontinue use of Digital Rights Management technology could soon by overshadowed by more "pioneering" and inventive ideas, hopefully designed to give fans better access to the music they crave.

While it is not surprising that the new executives in charge of EMI would shake up the tired model, it is quite telling that a leaked memo as revealing as this could only come in the wake of Radiohead's move for their new album In Rainbows. It seems all too apparent that the record labels needed a very stable artist to make the first move toward a more fan-based market, as opposed to any label risking a move away from the tried and failing model that Hands' cites. EMI is apparently the first label to embrace these new ideas, as was indicated by the DRM move, but hopefully the bigger companies will follow suit in due time. How long can they sit on their "hands?"

Nokia (NYSE: NOK) made a big fuss today as it launched an online music system and several multimedia phones. Some will have new touch screens like the Apple (NASDAQ: AAPL) iPhone. These are going to market in Europe almost immediately. Apple has not given a date for an iPhone launch there.

Most of the competition for Apple's music and device products is laughed at on Wall Street, Steve Jobs & Co. have sold over 120 million iPods which fuels traffic to iTunes. The iPhone is the most anticipated handset launch ever.

But, Nokia has what no other company can claim--a 36 share of the global handset market. Reuters writes that the company estimates that the global multimedia phone market will grow by 50% to 120 million units this year from 80 million in 2006.

With such a large market share, investors want to know where Nokia will go for future growth. It says the new revenue will come from software and service. The software will power multimedia phones. The services will include its new music store.

It is a frightening exercise for Motorola (NYSE: MOT) shareholders to look back at the launch of the RAZR and hit tremendous success which was still evident less than two years ago. Nothing prevented Motorola from riding the sales of that handset to get into the mobile media download business.

And, now it is too late.

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

In Fox News' review of the new Paul McCartney album, Memory Almost Full, the writer comments that "McCartney, the most successful pop performer/singer/writer in history, has left the mainstream music business." Although his reference is in regard to the degree of support the former Beatle had received from Capitol Records, an imprint of EMI, for his 2005 Grammy-nominated album Chaos and Creation in the Backyard, it made me wonder how big a role markets that are not music are beginning to play in the sale of music, both physically and digitally.

Memory Almost Full will be the first Beatle-related album available for sale digitally, a shift that McCartney's solo catalog may echo soon, but it's also notable because it's being released by Starbucks' (NASDAQ: SBUX) new independently owned label, Hear Music. This isn't the first time that the role of independent or small labels has been brought up in reference to the digital stores, but a name like McCartney's switching is big news indeed. His back catalog may not bring in as much as a digital Beatles catalog would, and understandably so. Still, the Beatles catalog will be available from EMI, a major music label, and it has been the most accommodating to digital sales thus far.

The point is that the "mainstream music business" was not able to keep an artist like McCartney satisfied. I realize that I am biased with regard to McCartney, but the relevance of this change cannot be overlooked for the music market. Hear Music probably should not even be linked with the music market because of its connection with Starbucks. If another industry, in this case a service industry, is able to better accommodate artists and ultimately fans, then the music industry needs to wake up. Sales are slow anyway.