Former Talking Heads frontman David Byrne called on record labels to remove DRM on digital files and shift from manufacturing and distribution companies to more closely resemble marketing firms in the face of increasing digital album sales. Byrne gave a presentation entitled "Record Companies: Who Needs Them?" at the South by Southwest music conference in Austin, Texas, today (March 15).

Byrne offered a slide show that predicated digital sales would outstrip CD sales by 2012. He said that year will be the "tipping point," much like the mid-to-late '80s when CDs overtook cassette sales. Once download sales became the norm, Byrne said, it will allow manufacturing and distribution costs to approach zero. "That is a fact," he said.

He said at that point, record labels will be faced with a sort of choice -- to ramp up marketing services to use music as a loss leader for tours and merchandise revenue, or aim only for international stars of the ilk of Britney Spears.

"Artists need help," said Byrne, who said he's in the final stages of negotiating a new contract with Nonesuch. He said the idea of artists working completely independent of a record label is possible, and pointed to the success of Aimee Mann. Yet Byrne noted that such a model won't work for smaller or developing acts, who need a team to provide marketing and tour support.

But Byrne seemed to imply that labels are not changing as rapidly as they need to be. He pointed to the royalties artists receive on each CD sale, and put the number at about $1.60. He said the royalty rate is essentially the same with an iTunes sale.

"There's no manufacturing or distribution costs," Byrne said, "but somehow the artist ended up with the exact same amount."

While conceding the marketing costs in the digital era won't be cheap, Byrne noted that sites like YouTube offer more possibilities to artists than MTV. He called up a YouTube video of a man standing in a cavern. "Nobody is telling you have to make a million dollar video," Byrne said. "You can make like this guy -- stand in a dangerous place and everyone will watch."

But first, he said, labels will have to remove DRM. He said he purchases most of his music online via eMusic, or obtains it illegally, due to the file constraints on files sold on iTunes. Byrne predicated that once DRM is removed, iTunes will no longer "have a monopoly," and labels will be better prepared to deal with Web sales.

An audience member suggested that such an idea was depressing, largely due to the decreased sound quality of a digital download. "It's kind of sad," Byrne said, "but I think of it as a boost for live music. As long as it doesn't get to too horrible -- the sound quality -- they'll go for convenience and accessibility. He added, "It doesn't have to sound good to move people."

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