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FROM THIS EPISODE

This is Celia Hirschman with On the Beat for KCRW.

2007 was certainly one of the more interesting years for the record industry. It will be long remembered as the first year major recording artists broke free from the structural business that bound them.

Prince's stellar performance at the Super Bowl, reignited interest in his wandering career. He quickly capitalized on the momentum with an enterprising move to give away his new CD to 3 million readers of a British tabloid newspaper. The move angered the record industry and the UK label refused to release the CD into stores.

Meanwhile Madonna left Warner Bros and made a deal for big money upfront. The $120 million contract with Live Nation offers little risk for the adventurous diva. But the move did launched a record label for the concert promoters, and they certainly pay her handsomely to do that.

But it was Radiohead's desire to try something different that created the biggest market revolution. Though their "pay what you want" download grabbed all the headlines, it was really the $80 special package that uncovered the financial gold mine. See how many others follow this model in the coming year.

Meanwhile, the trade struggled with its own changes. At radio, three issues dominated the news. First, the royalty rates for Internet radio. Though the arguments continue, it would appear that an amiable settlement is possible if the parties negotiate.

The four national radio broadcasters were forced to pay a total of $12.5 million, having been investigated for payola. Though they never admitted fault, they did pay the fines. Now just what does that tell you?

And the two satellite networks, XM and Sirius finally admitted their businesses wouldn't survive unless they merged. It's now up to federal regulators to decide their fate.

On the retail side, brick-and-mortar saw the first huge decline in CD sales. Borders, Sam Goody's, Barnes & Noble, Virgin, FYE – these are all big players and all of them have reported sharp declines in sales this year. That is everyone, in fact, except indie retailer Silver Platters in Seattle who expanded 42,000 feet of retail space just this year.

Of course, the real retail excitement was online. EMI was the only major to abandon the dreaded DRM code on their digital tracks. The other three labels have contemplated such moves but none have made the switch. Since the newly launched Amazon MP3 site only accepts tracks without DRM, the majority of music from Sony BMG, Warners and Universal are not included here.

We lost a few online retailers like Sony Connect and Amped, but we tightened up the playing field. iTunes, Amazon, eMusic, and Rhapsody are the ones to watch.

None of this is really big news. The trade always shifts to meet the market. But this year, the big changes came from the artists themselves. Fed up with letting others make decisions, many artists have taken the business into their own hands, to forge their own careers. It may not be their best decision, but for many, at least it's their decision.

This is Celia Hirschman with On the Beat for KCRW.

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