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Business Makeover: Record Industry

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If it's broke, fix it.

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Despite hawking digital tunes on their official site for the low, low price of "absolutely nothing," Radiohead saw their latest album, In Rainbows, downloaded much more frequently from illegal sources, such as BitTorrent and Gnutella. Even online music retail giants like Apple (AAPL) and Amazon (AMZN) can't compete with the siren song of anonymous peer-to-peer connections, which scrap every cent of profit. In the era of the quick, cheap fix, how can record labels make a living?

Some called Metallica spineless sellouts for moving to Elektra (WMG), but watering down all but guarantees a wider audience. Remember: Bands lose no integrity points with songs about British Petroleum played in NASCAR jumpsuits on official Dupont Fender Stratocasters.

Consumers have a negative view of record labels, considering them to be money-grubbing, soulless suits. To combat that image, adopt a "laid-back music fan" persona by wearing Grateful Dead t-shirts and scattering bongs around the office.

Band-themed merchandise can bring in extra green when album sales are stagnant. Though stickers and ironic t-shirts are standard, never rule out higher priced items like laptops, mink stoles or private planes.

Fans crave behind-the-scenes footage. Along with the music, include a DVD showing business affairs at Columbia Records (SNE), like drafting contracts, securing copyrights and negotiating percentages.

The main reason the music industry is barely keeping its head above water: Its stubborn death grip on the outdated CD. The first label to release an album on telepathic jukebox or brain laser is bound to make billions.

Piracy can be avoided by making products uniquely appealing. Only release albums with really, really pretty covers.




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