Radiohead's Sonic Boom

Everybody's talking about digital music these days -- Apple (Nasdaq: AAPL) versus Amazon.com (Nasdaq: AMZN) versus Wal-Mart (NYSE: WMT), DRM versus DRM-free tracks, I'm sure you've heard it all. But the band Radiohead is making a significant move into what sounds suspiciously like the future of music, and many companies that peddle musical media -- particularly the majors in the music industry, like EMI, Warner Music (NYSE: WMG), Vivendi's Universal Music Group, and Sony (NYSE: SNE) and Bertelsmann's Sony BMG -- may find this development more than a little unnerving.

Radiohead will allow its fans to pay whatever they like for its newest album, available on the Web. (In the first 24 hours, the influx of fan orders crashed the site, in fact, and a band spokesperson said few people are paying less than the going rate for an album.) This is a bold experiment, indeed. It underlines what many music fans have probably been waiting for -- the opportunity to cut out the middleman and deal directly with bands, thereby contributing to their favorite musicians' financial success instead of giving a sizable cut to a major label.

The traditional music industry faces its share of challenges. Although Apple has been very successful with iTunes, it's not like piracy has gone away. However, many contend that one of the major drivers for piracy is that many consumers don't have much respect for the major recording industry and its profit motives, not to mention its reluctance to innovate and embrace the changes in digital music. Plus, the RIAA doesn't seem to recognize that its often heavy-handed tactics antagonize many music fans.

Some entities are shaking things up. Take SNOCAP, which helps cut out the middleman. Some artists sell directly to fans through sites like News Corp.'s (NYSE: NWS) MySpace. Canadian label Nettwerk has also made a marked departure from the way major labels do business with its emphasis on making fans and artists happy (and not suing fans), and then embarking on interesting and innovative initiatives, like last spring's deal to start a label with video game publisher Electronic Arts.

Many commentators are pointing out that Radiohead is popular enough to be able to go this route, and lesser-known bands don't have the resources or the massive fan base to follow in these footsteps with much success, but this looks like the future to me. The traditional way the music industry has done business has ended up making many fans and artists unhappy -- and that's a prime example of the type of business model that's ripe for disruption.