The global music industry says it is close to a turning point where growth from digital revenues offsets declining sales of CDs, thanks to a combination of subscription services and tougher action on piracy.

The IFPI, the music industry’s international trade organisation says global revenues from digital music grew by 8 per cent in 2011 to $5.2bn, an acceleration on the previous year’s growth.

A slower rate of decline in sales of physical formats meant that the overall market’s drop slowed to 3 per cent, at about $16.2bn.

Rob Wells, president of global digital business at Universal Music, the largest record label by revenues, said he believed the “inflection point”, when digital revenues overtook physical globally, would happen in 2013, after the number of downloads overtook CD sales volumes in the US last year.

The growth in digital revenues lags behind the rate of volume growth in the industry, suggesting pricing pressure as the market reaches that transition. Downloads of single digital tracks rose 11 per cent in volume, with digital albums up 24 per cent, according to the IFPI.

However, Mr Wells and others insist that subscription music services, such as Spotify and Rhapsody, are providing incremental revenues, rather than cannibalising “à la carte” download services, of which Apple’s iTunes remains the largest.

The number of people subscribing to “all you can eat” music streaming leapt 64 per cent to 13.4m globally in 2011, the IFPI estimates.

Mr Wells said: “We haven’t seen a decay or decline in other methods of consumption.

“Some of those big global subscription players are only playing on a small playing field. Those services will expand over the next 12 months.

“As they mature, they are more likely to be bundled with internet service provider or operator subscriptions which is where we start to see real scale. The future is looking extremely bright.”

Universal, along with the other leading labels, owns a stake in Spotify but as its rivals Rhapsody and Deezer expand internationally, labels and artists stand to benefit because they are paid every time a track is listened to.

Edgar Berger, chief executive at Sony Music International said “We are going from headwind to tailwind.

“There is no question the music industry is going to be in great shape shortly, it will become a growing business again. The internet is a blessing for the music industry.”

After last week’s shutdown of Megaupload, the file sharing site which the US justice department alleges cost the entertainment industry hundreds of millions of dollars in sales lost to illegal downloading, music company executives hope that other websites – including Google – will do more to prevent piracy on their networks.

Frances Moore, chief executive of IFPI, criticised last week’s protests by Google, Wikipedia and other technology companies against two proposed US laws to stem file-sharing, the Stop Online Piracy Act and Protect Intellectual Property Act.

She said: “I often wish instead of hysterical resisting, our opponents would come forward with some constructive suggestions. It’s always ‘no, no, no’.”

Ms Moore said that in spite of the suspension of congressional debates about SOPA and PIPA last week, she was confident that US lawmakers would come back with “a different angle” to prevent piracy. “It shows me there is a commitment from Congress to come forward with legislation that tackles some of these problems,” she said.

The IFPI says that there has been a 26 per cent reduction in use of “peer-to-peer” file-sharing since the introduction of France’s “Hadopi” law to suspend persistent pirates’ internet connections.

Internet service providers have also been ordered to block piracy sites in New Zealand, Italy, Belgium, Austria, Finland, Malaysia and India.

Until the rise of online file sharing, obtaining such an influential anti-pop album meant frequenting obscure, eclectic record stores that trafficked in independent, experimental recordings. Since then, though, 20 Jazz Funk Greats’ importance has become more widely accepted—so much so that the album was remastered and re-released this past November.

The Throbbing Gristle reissue comes amid a wave of reissues for once-obscure bands, providing another sign that we’re living in a renaissance for cultural omnivores.

The stream of now-classic, once-hard-to-find albums that have been recently reissued, and those still to be released, would have been once unimaginable. The list of boxed sets from this year alone is worthy of awe: collections from American primitivist John Fahey, Chicago punk band Jesus Lizard, DC hardcore outfit Void, krautrock originators Can, Turkish psych pioneer Erkin Koray, Seattle funk, indie rock stalwarts Neutral Milk Hotel, music of the Ottoman-American diaspora, and Ghanian folk. Over the last 10 years, this list would expand to include Orange Juice, Bad Brains, Big Star, Fela Kuti, Gang of Four, Kleenex/Liliput, Les Rallizes Dénudés, Neu!, Suicide, the Fall, the Homosexuals, the Buzzcocks, Métal Urbain, the Raincoats, ESG, Beat Happening, the 13th Floor Elevators, Wire, and the Stooges. Then there are the collections of girl group sounds from the ’60s, Indianapolis funk, murder ballads, punkabilly, unending collections of international garage and psychedelic rock, or music from countries like Mauritania with no previously recorded output. And while the Beach Boys don’t rate as obscure, the 2011 release of their long-languishing Smile tapes handily encapsulates the trend: What was once sought after on bootleg by a relatively small group of collectors has been packaged for official release, to be displayed on Best Buy shelves across the country.

The unifying element across this list is that the original recordings weren’t commercially popular. These bands might draw a fervent cult following in certain circles or parts of the world, but few of these names would have been recognized in the larger forum of pop music when they first started. Some were independent musicians with unique sounds, and some weren’t interested in marketing—or were actively antagonistic to the idea of marketing.

As it has done with so many kinds of media, the Internet has helped these acts find and grow an audience—one that’s big enough to warrant reissuing albums that not many people bought in the first place. So much is accessible so easily that it’s hard to remember a time when an extremely influential act like Neu! would have been known only to a small set of music collectors. Now the current barrier to hearing something considered unpopular or outside one’s usual tastes can easily be breached by a cursory Google search. That has led to new, larger followings for old cult bands.

But with so much readily available online, re-releasing an album in a physical format may seem strange. In part, it’s a prestige play. A band like the Smiths—which came from the world of independent music and saw some success in the UK charts but were hampered by some aspects of independent distribution—now have the opportunity to put out a boxed set to an audience half-composed of older devotees keen on nostalgia and half an ever-widening, younger audience unfamiliar with their songs. That means a new chance to sell albums, and a new reason for the music press to sing the band’s praises. It’s the same motivation behind the rise of reunion tours (although, famously, The Smiths have yet to do one).

The irony of the download era is that older bands that were ignored and unappreciated during their existence have recently seen their influence and credibility rise, even as their work is now being given away for free. Some of the people behind reissues feel it’s only right for these acts to try to cash in on their new cultural cache. As Paul Smith of Industrial Records, which reissued 20 Jazz Funk Greats, put it in an email, “The attitude of ‘free for all’ culture encourages a lack of respect and appreciation/acknowledgement for the work, time and talent that goes into making music.”

But given that so-called “free for all” culture, even if a band experiences a resurgence of appreciation, does that translate to sales for new physical copies of old recordings? Recently, Joyful Noise Recordings re-released six Dinosaur Jr. albums on cassette tape, which went on to sell out in a matter of days. “[With] the prevalence of digital music today, a lot of music listeners have never owned a physical copy of a recording,” Karl Hofstetter, owner of Joyful Noise, says by email. “Digital music has reached a point where you are not required to purchase music in order to listen to it. All the music in the world is at our fingertips for free, but the obsessive fan’s desire to own something tactile isn’t going away.”

Spotify’s Daniel Ek created a free, Facebook-enabled platform that could save the recording industry from piracy–and iTunes.

It’s a typically damp, dark November afternoon in Stockholm, and Daniel Ek is ill. Over the past month the 28-year-old chief executive of Spotify has worn himself down jetting from his Swedish base to San Francisco, New York, Denmark, the Netherlands and France to visit his expanding sales force and launch his music service in one or another of the dozen countries it now operates in.

But there’s no rest for the weary. Next week he’s scheduled to return to New York to unveil Spotify’s new platform in front of his first-ever press conference—a platform that he admits still isn’t ready for a public debut. “I should be home in bed,” sighs Ek, his voice weak and scratchy, “but we need to get this thing perfect.” So the bald, barrel-chested Ek zips his white hoodie to his chin, swaps tea for his morning cup of coffee—the first of six he throws down in a typical day—and heads into an office that resembles a university library during finals. The pool table has been traded for more IKEA desks, and gray daybeds offer a place to nap between all-nighters. Forgoing his large office, which he mostly uses as a meeting room, Ek plops himself down at an open desk. Around him, a dozen engineers from nearly as many countries, united by their geek-chic uniforms—skinny jeans, printed T-shirts and cardigans—frantically bang out code on their silver MacBooks.

All this frenetic energy reflects the strange new reality of the music business. More than New York or L.A. or Nashville, this rented office space along Stockholm’s Birger Jarlsgatan has become the most important place in music, with Ek now standing as the industry’s most important player. Superstar bands like the Red Hot Chili Peppers—formed the year Ek was born—now trek to Sweden to kiss the ring; he sits shotgun in vintage cars with Neil Young (his iPhone boasts a picture of them cruising in a white 1959 Lincoln Continental); he texts breezily with Bono. “Both my (maternal) grandparents were in the music industry,” shrugs Ek, “so I’m fairly grounded about the whole thing.”

The music industry has been waiting more than a decade for Ek. Or more specifically, someone—anyone—who could build something (a) more enticing to consumers than piracy while (b) providing a sustainable revenue model. In the 1990s Shawn Fanning and Sean Parker essentially broke the recording industry with their short-lived illegal download site, Napster, which Ek describes as “the Internet experience that changed me the most.” It was fast and free and limitless—through the site Ek discovered his two favorite bands, the Beatles and Led Zeppelin—and he became one of the 18-to-30-year-olds now considered a lost generation: Those who don’t believe you need to pay for music.

In building his iTunes juggernaut out of the wreckage, Steve Jobs subsequently proved that the cure could be almost as destructive as the disease. By training consumers to buy singles, rather than the CDs that had been the industry’s lifeblood, and taking an outsize cut of the action, Apple stoked the continuing ­spiral. Recording industry revenue, a healthy $56.7 billion in 1999, according to IbisWorld, clocked in at about $30 billion in 2011.

Enter a third disrupter, Ek. In the current tech landscape, where Google provides the search, Facebook the identity and Amazon the retail, Ek wants Spotify to supply the soundtrack. As he describes it: “We’re bringing music to the party.” Which explains what’s keeping his sleep-addled engineers on a 24-hour cycle: Rather than a mere music player—albeit one with a revolutionary model that allows legal access to almost every song you’ve ever heard of, on demand, for free—Spotify aims to create an entire music ecosystem.

For a consumer, Spotify is an easy sell: The service’s 10 million active users (people who have listened in the past month) have access to 15 million songs on their desktops, all for the cost of hearing an occasional advertisement. It has the speed and ease of iTunes, the flexibility and breadth of Napster and the attractive pricing of online radio service Pandora. And unlike those predecessors, Spotify was social from the start, with tools that let you share playlists with pals—more than 1.5 billion songs have been swapped on Facebook so far.

After he was bounced as Facebook’s first president, Sean Parker begged Ek to let him invest: “Ever since Napster I’ve dreamt of building a product similar to Spotify,” his introductory e-mail read. The service impressed Mark Zuckerberg, too. “I checked it out and I thought, This is pretty amazing,” the Facebook founder tells me. “They internalized a lot of what we’ve talked about in terms of social design of apps.” That means turning the core product—in Ek’s case, a hard-fought song library—loose on third-party app developers to help Spotify evolve, making it even more tempting to potential customers.

Here’s how that social stickiness translates into revenue: You explore your friends’ playlists, discover new music with apps from Rolling Stone, Billboard and Last.fm, and build your own jukebox. Eventually you want to take it everywhere. That’s where Ek has you trapped. With Spotify you pay for portability—$10 a month buys you access to your collection on your mobile device.

This model has proven it can save the music business—in Sweden. One-third of Ek’s home country has signed up, and about one-quarter of those pay for premium access. According to Mark Dennis, who runs Sony Music in Sweden, Spotify single-handedly stemmed a decade of nonstop revenue drop when it launched in 2008; in 2011 Sweden’s music industry will likely see its first growth since the Clinton Administration, with Spotify accounting for 50% of all sales (up from 25% last year). This in a country that has long been a hotbed of piracy.

Extrapolate that on a global scale and the industry will have its magic bullet. With the stakes nothing less than the future of the recording business Ek arrived in the U.S. in July for a three-front battle with Apple, Amazon and Google. Some 400,000 Americans have already subscribed to the premium plan, according to a well-placed music executive, lending credence to Ek’s pitch that he can rescue the record labels by giving their product away for free.

The two facets of Spotify—music and technology—were introduced to Daniel Ek at age 5, when over the course of a few months he received a guitar (his mother’s parents had been an opera signer and a jazz pianist) and a Commodore 20 computer (his father left the family when Ek was a baby, but his stepfather worked in IT). He was a natural at both instruments. Within two years he was writing basic code as MTV played in the background of his family apartment in the rough neighborhood of Ragsved (known to the locals as “Drugsved”).

At 14 Ek latched onto the late-1990s dot-com mania, making commercial websites in his school’s computer lab. The going rate then for a commercial home page was $50,000, but Ek charged $5,000 and made it up in volume: He recruited his teenage friends, training the math whizzes in HTML and the artists in Photoshop. Soon he was netting $15,000 a month and buying every videogame out there (one favorite: a business game called Capitalism).

True to the first generation to grow up online, he sought to master everything Internet. He bought some servers to see what made them tick, and wound up earning another $5,000 a month hosting Web pages. At 16, obsessed with Google’s speed, he applied to be an engineer there (“Google said come back when you have a degree”) and then set out to build his own search company.

That project failed, but led to a gig at a company called Jajja, where he worked on search engine optimization. The money was good, but the high schooler wasn’t really into it. He used the paychecks to buy more servers and tuners to chase his latest obsession: recording every program on TV at once (he had no clue TiVo was pulling off the same trick). The stacks of servers in his room got so hot that Ek would strip to his underwear as soon as he walked in.

After high school Ek enrolled in Sweden’s Royal Institute of Technology to study engineering. After eight weeks, realizing that the entire first year would focus solely on theoretical mathematics, he dropped out. Eventually a Stockholm-based ad network called Tradedoubler asked him to build a program to tell them about the sites they contracted with, and Ek built something so effective that the company paid him about $1 million for the rights to it in 2006; he made another $1 million selling related patents.

Then things fell apart. A self-made millionaire at 23, Ek found himself holed up alone in the woods 20 miles south of Stockholm enduring a harsh Swedish winter and a harsher bout of depression. Seeking the fast life, he had bought a three-bedroom apartment in central Stockholm, a cherry-red Ferrari Modena and entrée to the city’s hottest clubs. But it was still hard to attract girls, and the big spending attracted the wrong ones. “I was deeply uncertain of who I was and who I wanted to be,” Ek says. “I really thought I wanted to be a much cooler guy than what I was.”

Miserable, he sold the Ferrari and moved into a cabin near his parents, where he played guitar and meditated. Ek had already started three tech companies, but he now toyed with the idea of getting by as a professional musician. (Ek plays guitar, bass, drums, piano and harmonica; he doesn’t sing). “I wouldn’t be rich, but I could have made a living.” There in the woods Ek finally decided he’d somehow marry music and tech, the two passions that drove him. During this time Ek started hanging out with Tradedoubler’s chairman, Martin Lorentzon, an energetic 42-year-old who works out twice a day. A Silicon Valley veteran (Alta Vista), Lorentzon took Tradedoubler public in 2005, netting himself $70 million. No longer involved in the day-to-day operations, he too was bored and adrift. The first time Ek visited Lorentzon’s Stockholm apartment he found only a mattress and a laptop balancing on an IKEA chair. “I asked him when he had moved in,” says Ek. “When he said it had been more than a year ago, I knew he wasn’t happy.”

The pair bonded over marathons of gangster films like the Godfather trilogy and Carlito’s Way (a ritual they repeat each year). “I got a very strong feeling when I met Daniel,” says Lorentzon. “To partner up I have to like the person like a brother, because we’ll face so many problems. The value of a company is the sum of the problems you solve together.”

Ek doubted Lorentzon would leave Tradedoubler, so later in 2006 he set a one-week deadline. Before they committed to partnering, Lorentzon would have to publicly resign as chairman and ­transfer a million euros of seed money into Ek’s account. The next Monday ­Tradedoubler sent out a press release announcing Martin Lorentzon’s resignation. Later that day he told Ek to check his bank account. The money was there. The two men had yet to decide the type of business they would start.
Lorentzon and Ek were in a unique place: The former no longer needed the money, and the latter no longer cared about it. So they decided to ignore the dollars and aim for disruption. Their target: music. “It disturbed me that the music industry had gone down the drain, even though people were listening to more music than ever and from a greater diversity of artists,” says Ek.

Sitting in two different rooms at Ek’s apartment, the pair yelled out possible titles for a music site—without even yet knowing what it would do—when Ek misheard one of Lorentzon’s suggestions. He typed the word “Spotify” into Google. There were zero hits (today: 64 million). Ek and Lorentzon registered the name, and started working on the ad-based plan. Once that gelled, they recruited a handful of engineers and took the new team to Barcelona to party and listen to what Ek calls “weird German electro-pop.” Then they got to work.

Back in Stockholm they built a prototype based on the interface of Apple’s iTunes and the sleek black styling of Ek’s Samsung flat-screen TV. Unlike music sites that had launched with pirated music, Ek wouldn’t debut Spotify until he signed deals with the labels. “We wanted to show that we were not in it to use their content to flip the company like others have done,” Ek says.

Ek, with the help of industry lawyer Fred Davis, initially tried to get global music rights and was quickly turned down. So he aimed for European licenses, which he figured would take three months—it took two years. Ek and his team hounded label execs, pitching them that their free, ad-based model would eventually lead to more sales. No one bit. “They’d say, ‘Yeah, this sounds really interesting’ or ‘Send me over some stats,’ which really means ‘There’s no way in hell we’re going to do this,’” Ek says and laughs. “But I was 23 at the time, and I thought, Wow, this is great, we’re going to get this done.”

Ek eventually loaded Spotify with pirated songs and sent demos to industry execs. That got them noticed. “With Spotify people don’t get it until they try it,” Ek says. “Then they tell their friends.” As Ek negotiated with the music companies, Spotify burned through cash. On top of salaries and overhead, Ek and Lorentzon were pledging million-dollar advances to labels for access to their music catalogs. VCs wouldn’t touch them. To stay afloat they plowed nearly $5 million into Spotify, atop the $2 million Lorentzon had already seeded. “We bet our personal fortunes, and sometimes we bet the entire company,” says Ek. “We led with our conviction rather than rational, because rational said it was impossible.” In October 2008 Spotify went live in Scandinavia, France, the U.K. and Spain. It took nearly three more years to finalize deals in the U.S.

“He’s the only tech entrepreneur who’s had the patience to achieve what he has with the record business,” says Sean Parker, now a Spotify board member, who helped open the door to U.S. deals, including one with Facebook. “He has this Zen-like patience and an ability not to crack under pressure or get frustrated. Over and over again he puts himself in a situation where a normal person would have thrown in the towel.” As I talk with Ek in his office, he sits straight and motionless like a Swedish Buddha; the only thing moving is his mouth, not even blinking his icy blue eyes.

Such calm helps manage the chaos: Last year Ek was on the road 100 days—mostly a triangle between Europe, New York and California, a schedule that recently cost him his girlfriend of two years. When he’s in Stockholm, Ek wakes around 8:30 a.m., answers e-mail for an hour, then takes the five-minute walk to Spotify. He spends about 25% of his time recruiting; otherwise he’s at his open desk or walking the floor. “Ek’s one of the few people,” says Parker, “who can handle the technology side, the strategic side and the deal side of the business.”

Ek works in the office until 8 p.m., eats dinner out and then returns home to unwind, either by playing guitar for a few hours or juggling a rotating trio of books (most recently, the Steve Jobs biography, a primer on typography and a guide to bonzai trees). Then he hops back on e-mail, before typically turning in around 2 a.m. Lorentzon wants Ek to find a balance: more exercise, less junk food, more sleep, less work. The last goal will be tough to achieve for the foreseeable future.

Ek bounds up the sleek white stage in Greenwich Village’s Stephan Weiss Studio on Nov. 30, as dozens of typing journalists and rows of live TV cameras stand ready. Though thrilled that the new platform is set for launch, he can’t wait for the press conference to end. When Ek operated just in Europe, he could lie low. But now that Spotify has made it to America—home to the cults of Bezos, Gates, Zuckerberg and Jobs—Ek must switch from programmer to preacher. For Spotify to scale, he needs to hype his platform, generate buzz and get labels, artists and now developers to be excited to partner up.

He doesn’t need to win over investors. Ek’s roster has surged over the past few years. Spotify went from some smallish Swedish funding to a heavyweight round from social media elite (Li Ka-shing, Sean Parker and Founders Fund), who collectively put in more than $50 million at a roughly $250 million valuation. This past summer DST, Accel and Kleiner Perkins reportedly invested close to $100 million at a $1 billion valuation. “Daniel was an entrepreneur that we had to, and wanted to, work with,” says Accel’s Jim Breyer. “The combination of a passion for music as well as his idea of making music as frictionless as possible for discovery and sharing is where we hit it off.” Ek still holds about 15% of the company. Thanks to all that seed money, Lorentzon owns some 20%.

With 2.5 million paying customers worldwide (85% pay the $10 a month for portable and the rest pay $5 for ad-free access), plus advertising revenue, Spotify is currently generating a run rate of around $300 million. Using Pandora as a comp, that would make Spot­i­fy worth north of $2 billion—and Ek, at 28, worth over $300 million on paper. But the company is likely worth more: Spot­i­fy has Pandora’s radio capability as well as its limitless library of shareable songs.

Plus, Pandora doesn’t have Spotify’s social media muscle—specifically, Facebook, which is embedded into Ek’s platform, and vice versa. Those billion-plus shared songs don’t happen by accident: Before cinching the deal this September, Ek’s team spent a year perfecting the app, basing five engineers at Facebook’s headquarters. “I don’t think there’s a Facebook app so well-resourced,” says Ek. “We wanted it perfect.” Adds Zuckerberg: “He clearly is very forward-thinking on where he wants to go. He’s very clear on the things he wants for the product and what he doesn’t want.”

The real threat to Ek, ultimately, isn’t his product—it’s the industry Spotify purports to save. Spotify will only be as successful as its music library, and some bands—notably his two favorites, the Beatles and Led Zeppelin—aren’t playing ball. Recently Coldplay and the Black Keys denied Spotify access to their new albums. Scooter Braun, agent to Justin Bieber, understands the thinking but tells me: “They should then tell radio not to play records for free and call YouTube and say don’t allow my music to stream on videos for free.”

More ominously, the initial music licenses expire in two years, and Ek must deliver enough cash flow to prevent the labels from demanding higher royalties—or pulling out all together. (So far, Spotify has paid them about $150 million.) Right now the labels have the leverage, and Ek has wisely brought the big players into the tent—as part of the licensing deals, Spotify granted equity stakes to the four largest music labels (Warner, Universal, EMI and Sony) and Merlin. Industry sources put their collective cut at nearly 20%.

Those stakes, while significant, aren’t enough to automatically quell an insurrection. Ultimately Ek needs to change the power dynamic before the licenses are up. He has two years to make Spotify the world’s dominant music source, a hitmaker so big no label or artist can afford to opt out.

Globally 500 million people listen to music online. With a 2% market share he has plenty of upside, albeit plenty of competition, including iTunes, burgeoning cloud services from Amazon and Google and the pirates Napster set free all those years ago. That’s another motive for opening up Spotify to developers: He’s hoping they’ll turn it into a universal music platform, while allowing him to focus all of his employees, now 500 strong, solely on growth.

“Google has 30,000 employees,” Ek says. “A part of me wonders what if they were all focused on really solving search.” He takes out his iPhone. Using its Siri voice software, he asks it when tomorrow’s first appointment begins. After a few seconds the computerized voice says 11 a.m. “Imagine if this was three times as fast or truly understood my intent,” Ek says. “It’s probably the biggest threat to Google; it’s a whole new way of interacting.”

Does he plan on building a voice activated Spotify interface? He flashes a mischievous smile. “Play me some Coldplay,” he tells the phone. Its small speakers ring out with the opening piano chords of the band’s hit “The Scientist.” “We hacked into it a few weeks ago,” Ek says, with a satisfied nod. “I’m not an inventor. I just want to make things better.”

First, the case for the prosecution. It would be nice if Lana Del Rey really was the mysterious polymath auteur she briefly appeared to be when the vaguely Adam Curtis-like clip for Video Games started doing the rounds on the internet, rather than a female singer who’s worked – like Adele, Duffy, Florence Welch and Katie Melua – with blue-chip songwriters-for-hire Eg White and Guy Chambers. It would be nice if the record company biog that called her “a recent resident of a New Jersey trailer park recently emerged from smalltown USA” didn’t feel at least slightly duplicitous given she’s actually Lizzy Grant, the daughter of a wealthy estate agent and internet domain magnate – “Hypnotic New Album From Domainer’s Daughter Lana Del Ray Now Available!” offered Domain Name Journal’s headline on the release of the 2010 debut album her management has gone out of the way to suppress – and the small town was Lake Placid, ski resort, tourist spot and self-styled “playground of North America”. And it would be nice if the image overhaul she underwent – including the name change, never mind rumours about the size of her lips – hadn’t provoked the kind of prose you find on MTV’s Style Blog: “ZOMG she is so important … the self-proclaimed “gangster Nancy Sinatra’ embodies the best of strong, sculpted eyebrows, bump-its and hairsprayed tonsorial PERFECTION.”

Now the case for the defence: none of that matters. For one thing, you could argue it’s the prerogative, perhaps even the duty, of pop stars to reinvent themselves in interesting and fabulous ways: what is pop if not a theatre of dreams in which David Jones from Brixton can reimagine himself as a gay alien, Bob Dylan can spin ridiculous yarns about his uneventful, middle-class childhood and – a personal favourite – a diminutive Italian-American called Ronald can become Ronnie James Dio and slay a dragon onstage every night? Authenticity is for the Antiques Roadshow, not pop music: if you’re that concerned with authenticity, you might consider avoiding pop and rock and sticking with field recordings and Topic’s Voice of the People series.

And for another, it’s hard not to feel that if Lizzy Grant had had a song as good as Video Games on her debut album, she would have attracted substantially wider attention than the pages of Domain Name Journal and the Adirondack Daily Enterprise (“a girl from an upstate New York town who may be on the verge of something great!”). She might not have needed the makeover at all. Regardless of who made it, where they came from, who their dad is, what they’re called and whether or not their lips have been subject to the ministrations of a surgeon, Video Games would be a magnificent song. There’s something imperishable and undeniable about its sighing melody, the way it rises and falls with the mood of a lyric that can’t seem to decide whether the bloke it’s about is the best thing since sliced bread or a unbelievable pain in the arse. You can see why Video Games united the guy who writes Pitchfork’s Track of the Day column with whoever picks the Radio 2 playlist, why it doesn’t seem to have lost any of its haunting power in the face of ubiquity. And if one of the marks of a great song is how it can withstand radical reinterpretation, you could point to the variety of fanatstic remixes of Video Games, which in the hands of Balam Acab, reinvented the song as hallucinogenic ambience, and via Joy Orbison as strange, beguiling, disjointed house music.

Video Games (BALAM ACAB Remix) – Lana Del Rey by BALAM ACAB
It’s tempting to say with a song that good it doesn’t matter who sings it, but that’s not strictly true. As pop divas who collaborate with Eg White go, Lana Del Rey sounds hugely understated. Her voice has a lot in common with Mazzy Star’s Hope Sandoval – not exactly a touchstone for many artists who’ve made the top 10 in 2011 – which fits the song perfectly, chafing against the orchestral bombast, the harps and pizzicato strings in the background: this is a song about big emotions brought on by everyday events, an indolent boyfriend opening a beer, a visit to a bar, putting on perfume. It would sound terrible if, say, a contestant off The X Factor did that awful thing Louis Walsh persists in referring to as “making the song your own”: it wouldn’t work if it was decorated with a load of showy look-at-me melismatics.

The future for Lana Del Rey feels a little uncertain. She went from mysterious internet phenomenon to the Q awards at such speed you suspect even the shadowy management that suppressed her first album and got her to change her name are a bit taken aback. You might feel more confident about her ability to deliver an album that lives up to the mammoth expectations and confounds her critics if she actually were the mysterious polymath auteur she briefly appeared to be. That said, being an arch, artfully constructed figure certainly doesn’t preclude making great albums and she’s already made one extraordinary record, which is one more than most people make. Whether Video Games turns out to be the one truly remarkable thing about her, or a portent of greatness to come is a moot point. But, like the criticisms levelled against her it doesn’t seem to matter, at least while the song is playing.

It is pure historical re-enactment, interrupted only to write new material in the style of the band it’s standing in for, like the hired hand who steps in for the mystery-novel author who keels over before finishing a trilogy. It’s designed to satisfy fans who still crave the feeling, if not quite the author himself. It quenches pre-existing thirst.

Anomaly? No. The same can be said of almost the whole of major-label rock these days, a musical universe in crisis like no other, full of old bands spinning their wheels, praying for one more summer out under big-tour sheds, and their young reinforcements, not much more than a field of dullards who are the artistic equivalent of grocery store generic brands.

2011 may well be remembered as the most numbing year for mainstream rock music in history. (For the purposes of this article, that’s more or less rock released on American major labels, regardless of origin, and played on mainstream rock radio stations.) The genre didn’t produce a single great album, and the best of the middling walked blindly in footprints laid out years, even decades, earlier. Plenty of juggernauts — U2 and Bruce Springsteen, among others — took the year off, but the genre’s failings are creative, not commercial. At this point rock is becoming a graveyard of aesthetic innovation and creativity, a lie perpetrated by major labels, radio conglomerates and touring concerns, all of whom need — or feel they need — the continued sustenance of this style of music. The fringes remain interesting, and regenerate constantly, but the center has been left to rot.

Declaring a genre dead is the worst, least imaginative sort of proclamation, so let’s call it zombified: it moves, it takes up space, it looks powerful from afar — with oodles of bands working hard, and some even making money — and garish up close. It lacks nutrients. How else to explain the critical consensus around a band like Foster the People, whose album, “Torches” (StarTime/Columbia), was one of the most lauded rock albums of the year by an emerging band, even though it did little to add to the soul-infused lite-rock of the 1980s. And what of the Black Keys, who have committed themselves to undistinguished garage-soul and have cruelly outlasted their onetime peers the White Stripes? Their latest, “El Camino” (Nonesuch), is one long airless, swingless jam, a flat boogie primer for foreigners and marketers. Or take a less acclaimed but still popular band: the colossally dopey Hot Chelle Rae, which on “Whatever” (RCA) recalls the early breakthroughs of pop-punk bands like Sum 41 and Blink-182, though with sprinkles of power-pop and hip-hop.

These bands at least are doing their best to resist the tides around them, borrowing from different influences than their far more numerous neighbors. Those bands — Nickelback on “Here And Now” (Roadrunner), Chevelle on “Hats Off to the Bull” (Epic), Disturbed on the B-sides collection “The Lost Children” (Reprise) — all released big albums this year that work the post-grunge rock spectrum, to varying degrees of success but with equal amounts of innovation, which is to say little. The burly guitars are the same, as are the melancholy choruses, the assertive but not affirming drumming and the sense that this has all been done before, and better (in some cases by Nickelback itself, several years ago). Daughtry almost fell into this same trap, as it has in the past, but avoided it by taking its morbid power rock and moving toward Bon Jovi hopefulness on its new album, the largely enjoyable “Break the Spell” (19/RCA).

Even for those whose version of arena rock didn’t lean so heavily on groaning, this was a terrible year full of creative flops, and often commercial flops, by long-reliable acts that failed to arouse even their typical level of interest: Evanescence’s “Evanescence” (Wind-Up), Blink-182’s “Neighborhoods” (DGC/Interscope), Coldplay’s “Mylo Xyloto” (Capitol). That’s to say nothing of the airless comeback albums by bands well past their sell-by date: the Red Hot Chili Peppers’ “I’m With You” (Warner Brothers), Limp Bizkit’s “Gold Cobra” (Interscope), R.E.M.’s “Collapse Into Now” (Warner Brothers), Sum 41’s “Screaming Bloody Murder” (Island). There was also the outrageously fraught “Lulu” (Warner Brothers), by Lou Reed and Metallica, which defied most categorization yet somehow still falls neatly into this one.

Scale in and of itself need not be a deterrent to creativity; look at hip-hop, where plenty of sonic innovations take place on the biggest stages, proffered by the biggest stars. Even major-label country, no firestorm of originality, has been riskier in the last decade than major-label rock, which is hiding out in a few comfortable modes, hoping no one will ask much more of it.

But it wasn’t so long ago that major-label rock had bursts of vitality; at least two infusions of energy in the last two decades kept it slightly unpredictable. There was Nirvana’s breakthrough in 1991, which brought grunge to the mainstream and also unapologetically splattered the advances of 1980s alternative rock — college rock back then — all over a huge canvas. And a decade ago came the arrival of bands like the Strokes, the White Stripes and several others whose creative vision revolved around a definite article, who ascended quickly from the indie-rock underground to something grander without sacrificing the fundamental quirks that helped them connect in the first place.

The veteran band with the best 2011 was Foo Fighters, which continued its quest to average-out all the great rock albums from the mid 1970s to the early 1990s on “Wasting Light” (Roswell/RCA). The band won the MTV Video Music Award for Best Rock Video, besting four younger but probably not better bands (the Black Keys, Mumford & Sons, Foster the People and Cage the Elephant); in his acceptance speech, the frontman, Dave Grohl, once of Nirvana, took a stand that almost certainly fell on deaf ears: “I just want to say, never lose faith in real rock ’n’ roll music, you know what I mean? Never lose faith in that.”

About an hour after Mr. Grohl’s speech, the lone rock band of the night performed: Young the Giant, which made a tepid showing as if to rebuke Mr. Grohl for his empty hope. Which was a shame, because that band’s self-titled debut (on Roadrunner) is one of the year’s most careful major-label releases, a modest reframing of the breakthrough indie rock of the 1990s that, while pushing no boundaries, still felt promising, a foundation for something riskier. The same could be said of Needtobreathe, which has done a good job of being the next Kings of Leon, except with a more potent motor; its album “The Reckoning” (Atlantic) felt dangerous in places, as apt to seek out idiosyncratic harmonies as sticky melodies.

These bands are a couple of rare bright spots working in the major-label system. Add to that pile Paramore, which didn’t release an album this year. It stands out not only for its ability to match manic energy and powerhouse melodies, but also that it’s fronted by a woman, Hayley Williams, one of the most convincing singers in mainstream rock. It doesn’t help that some bands are beginning to bypass major labels altogether. The Gaslight Anthem, for example, has the potential to make huge, sweeping, pastoral post-Springsteen anthems, but thus far it has committed to doing so on an independent label.

Can you blame it? Too often major labels continue to commit resources to bands whose albums linger on the Rock Albums chart for months, free of ambition. 30 Seconds to Mars recently set a Guinness World Record for most shows performed in a single album cycle (over 300), which, viewed cynically, means it was easier for them to play old songs than write new ones. The album in question, “This Is War” (Virgin), was released in 2009 and only certified gold a few weeks ago. It’s a post-industrial, post-prog yelp-fest, a faint tracing of an early Nine Inch Nails album, and were it not for the fact that its lead singer is Jared Leto, it might have fizzled some time ago.

But here’s to another 300 shows by 30 Seconds to Mars, if only as a reminder of the band’s fundamental flimsiness, and of the flimsy system that props it up. It’s a living funeral, and it’s got to come tumbling down sometime.

Among musicians, “flat” is a word you don’t want to hear. But to the industry, flat is truly music to everyone’s ears.

Soundscan’s sales year doesn’t end until Jan. 1, but current year-to-year comparisons have album sales for 2011 ahead of comparable 2010 business.

OK, it’s only by a whisker of 1 percent. But it is welcome news in an industry where album sales for 2010 were down 13 percent from 2009. And prior to that they’d been down an average of 8 percent every year through the 2000s, suggesting an incredible shrinking music business.

This year reversed the trend, but there is a cloud buried in the silver lining: the success stories of 2011 will not be easy to replicate.

The year’s two biggest albums were Adele’s “21” and Michael Buble’s “Christmas” — and even the most copycat-prone execs aren’t foolish enough to start looking for pleasingly plump Englishwomen or Sinatra-bred carolers to sign.

Regardless of how applicable the lessons might be, here’s our look back at what worked and what didn’t in 2011:

RETRO ROCKS … IF YOU DON’T CALL IT RETRO

Artists from Adele to the Black Keys thrived by recalling good old days for oldsters while seeming utterly contemporary to kids who’d rebel at the word “throwback.”

Also read: Review — Adele Bares It All in Candor-Filled ‘Live at Albert Hall’

At last tally, Adele’s “21” had sold 5,281,000; with two sales weeks yet to be reported, the blockbuster should finish out the year a little shy of 6 million. (The only release in the past few years to cross the 6 million mark was Taylor Swift’s “Fearless.”) Moreover, she sold an additional 750,000 copies this year of her previous album, “19.”

Adele is a singles artist, too. “Rolling in the Deep” has sold 5,665,000 downloads, followed by “Someone Like You” with 3,352,000, “Set Fire to the Rain” with 963,000, and “Rumour Has It” with 551,000.

Also read: Why Lady Gaga’s ‘Born This Way’ May Save the Music Industry

On a smaller but louder end of the spectrum, the Black Keys put the lie to “rock is dead” theories — again — by moving 426,000 copies this year of their two-year-old “Brothers.” Their brand new “El Camino,” whose nostalgic aspects lean more toward glam-rock than neo-blues, has sold an impressive 293,000 units in two weeks.

BET ON THE RIGHT CAROLER

Everyone guessed there’d be a big Christmas album this year. Almost everyone guessed it’d be Justin Bieber’s. But Buble’s sold 1,964,000 of his holiday CD, versus Bieber’s 1,003,000.

We should have seen it coming, since Buble’s previous album quietly sold 2 million-plus. Despite his crooner image, Buble’s holiday set wisely had something for everyone, whereas Bieber’s had something to annoy just about everyone outside his core.

“Christmas” currently stands at No. 3 on the list of 2011’s bestsellers, and will surpass Lady Gaga to land at No. 2 by Jan. 1.

Again, maybe not a surprise to anyone who recalled how Josh Groban’s “Noel” became 2008′s surprise bestseller.

FORGET WHAT WE SAID ABOUT ROCK NOT BEING DEAD

The news wasn’t so great if you weren’t the Black Keys. One of the biggest bands of the 2000s, Evanescence, belly flopped with their self-titled third album, which has sold an anemic 284,000 units in 10 weeks and currently sits at No. 101.

Also read: Universal’s $1.9B EMI Deal: IN a Digital World, Market Share Counts for Less

Some other big rock names did just OK. Coldplay sold 877,000 copies of “Mylo Xyloto” in eight weeks … impressive, until you remember their last album sold 721,000 in one week.

Don’t call Blink-182′s “Neighborhoods” a comeback. The dormant superstars’ return moved 259,000 units in 10 weeks. Their current neighborhood (No. 200 on the Billboard 200)? The chart ghetto.

Daughtry looked to be one of the big sellers of this holiday season, on paper, but their new album sits at No. 27, having sold 241,000 in a month.

The Red Hot Chili Peppers sold 458,000 of their latest, leaving a long road to catch up with the two and a half million their last effort managed. The term “red hot” just doesn’t seem to apply to anything related to rock …

Unless, of course, it’s U2’s “360” tour, officially the highest grossing ever. Their lengthy worldwide trek brought in $293 million, playing to 2.8 million patrons.

SINGLES ARTISTS VS. ALBUM ARTISTS

Adele and Taylor Swift sometimes appear to be the only acts who can move millions of long-players and singles. Swift’s 2010 release “Speak Now” sold another 902,000 copies this year, upping its total to 3.9 million.

But the trend is toward acts like LMFAO, who had far and away the year’s biggest single with “Party Rock Anthem” — a 4,579,000 seller as of mid-month.

Also read: Review — Amy Winehouse’s ‘Lioness’ Opens Up an All-Too-Empty Vault

The dance duo also have the current top-selling single with “Sexy and I Know It,” with 2,544,000 downloads. Another song, “Shots,” has moved 1,540,000. Fans clearly prefer the a la carte approach. The act with the year’s top-selling song can only lay claim to the 56th best-selling album, as “Sorry for Party Rocking” has sold 401,000 copies.

The ultimate example of a singles-only act: Hot Chelle Rae. The pop group won best new artist at the American Music Awards, after their “Tonight Tonight” single sold an astonishing 2,382,000 singles. The subsequent album has moved 31,000 copies in three weeks.

Britney Spears may also fall into this category now. Her “Femme Fatale” did better than expected, given a run of bad pre-release publicity, but its 725,000-copy total wasn’t good enough to push it into the top 20 sellers of the year.

NEW COUNTRY VS. OLD(ER) COUNTRY:

It used to be that country was the genre most hospitable to mid-career artists. Tell that to Martina McBride, who’s sold a mere 119,000 in 10 weeks. Toby Keith is down to No. 28 after just eight weeks, with an OK 266,000 tally, the kind of number he used to do in just his opening week.

So who’s barnstorming down the dirt road? Country’s new new guard of guys. Jason Aldean’s “My Kinda Party,” a late 2010 release, has racked up a 2.2 million total, and it moved back up to No. 16 in the week prior to Christmas. No other album that’s been out more than a year has anywhere near that ongoing momentum.

For second-tier success stories, check out Eric Church at 504,000 units, Luke Bryan at 580,000 with his latest, the Zac Brown Band adding 720,000 to their 2010 album’s total — and Scotty McCreery, putting an end to the recent “Idol” curse with 748,000 and counting.

One female-fronted group broke through the wall of dudes: the Band Perry added 666,000 to the 998,000 total for their debut album, which will be well over a million by year’s end — capitalizing on their 3.5 million-selling single, “If I Die Young,” the funeral song of the millennium.

DID HIP-HOP FAIL TO WATCH ITS THRONE?

Eminem had the top-selling album last year, but there were no such contenders in 2011. Lil Wayne had the best first-week tally, selling over a million — but he has yet to double that. Still, his “Tha Carter IV” is the year’s fourth-best seller, with 1,826,000 so far.

Jay-Z’s and Kanye West’s “Watch the Throne” is up to 1,116,000, but was expected to have done better. Drake’s sophomore “Take Care” will soon surpass it. As for the old guard, you only have to look to The Game to see who’s lost his game, with a braggadocio-defying 222,000 units.

LOSS LEADERS TAKE A LOSS

Lady Gaga should end up with the third best-selling album of the year, after Adele and Buble — but it’ll always have a steroid-sized asterisk, since first-week sales were goosed by a controversial 99-cent sale on Amazon.com. Billboard allowed the sub-dollar sales when they celebrated a million-plus opening week for “Born This Way,” but later announced they wouldn’t include virtual giveaways in the future.

That’s not to say Gaga’s fans aren’t willing to shell out where it counts: at the box office. Her concert trek grossed $72 million — even without putting any tickets on sale at the Dollar Store. She was the only performer under 30 besides Swift to land among Billboard Boxscore’s top 10 money-making tours, a realm otherwise largely populated by the veteran likes of U2, Bon Jovi and Roger Waters.

With music shelf space still shrinking at big-box stores, which of course helped kill dedicated music outlets during the flush years, it’s doubtful whether music can manage another up or flat year in 2012.

That might take Adele breaking her every-other-year release pattern and giving us a surprise “22″ on the inevitable path to “23.”

As Kaskade, Ryan Raddon is at the forefront of an electronica wave that’s sweeping pop music and upending underground dance culture. But after a year when he did almost everything right as a DJ and producer, he’s still trying to shake the one concert that went wrong.

The San Clemente-based artist was among the biggest stories in dance music this year, reportedly commanding up to six figures per gig and conquering the global circuit with a double album, “Fire & Ice,” that redefined his near-decade-long career and landed in the Billboard Top 20 (with its iTunes release hitting No. 4 on those charts). DJ Times deemed him the best DJ in the world, and he headlined global festivals, including the groundbreaking IDentity dance tour. He’ll cap the year with two headlining New Year’s Eve performances, jetting between sets at the White Wonderland rave in Anaheim and at Marquee in Las Vegas, the site of his popular year-long monthly club residency.

But in July, at the L.A. premiere of a documentary film on the Electric Daisy Carnival, things went awry. Raddon tweeted that he would be spinning atop an ad-hoc mobile stage on Hollywood Boulevard. Promised “ME+BIG SPEAKERS+MUSIC=BLOCK PARTY!!!,” thousands of fans swamped the street, leading to a confrontation with police, a shutdown of the boulevard and the media calling it a “riot.” Fearful theater chains canceled subsequent screenings of the film, and a public debate flared anew about whether dance music attracts a volatile audience.

For an artist who prides himself on clean living and a relentless work ethic, it was a low moment that, he believes, missed the point of his music.

“It was disappointing on so many levels,” he said. Raddon admits that he “didn’t anticipate the draw. But it was a bummer how it got played in the media. I always get angry when people make dance music out to be something cheap, where they think it’s all about drugs or no one would come.”

That such a mishap didn’t faze his career is a testament to his demand as a DJ and to the rising tide of dance music worldwide. This coming year may be when Kaskade obliterates the last walls between orthodox rave music and mainstream pop. And despite the Hollywood incident, it might also be the year he helps change the genre’s decadent reputation into something more wholesome and maybe even spiritual.

As his recent album title suggests, Raddon’s career as Kaskade has been defined by seemingly incompatible elements. Raised in the Chicago suburbs, Raddon was brought up in the Mormon faith, attending Brigham Young University and the University of Utah, where he refrained from the stereotypical dance-culture staples of drugs and drinking. He traveled to Japan for a Mormon mission and speaks fluent Japanese.

After school, he began releasing singles upon taking a job with the San Francisco dance label Om and released his first full-length in 2003, putting out albums roughly every two years and moving to the influential Ultra label in 2006. As he entered the top flight of global DJs, however, the 40-year-old snowboarder and married father of three kept strong ties to his faith. He cites the atmosphere and emotion of religious music as one of his chief influences as a dance producer.

“There are real similarities. Listening to music is such an uplifting, spiritual thing,” Raddon said. “It’s far-fetched to some, I understand that. But the way dance music brings people together, it’s not a big stretch from hymns.”

Incantatory, melodic vocals are what sets his tracks apart from the morass of dance peers. Pop has thoroughly accepted dance music sounds, and artists like Katy Perry and Lady Gaga (Raddon has remixed for both) have deployed them for huge hits. But the reverse has been slower to take hold — orthodox dance producers usually structure songs around micromanaged samples and long-simmering bass drops rather than verses and choruses.

Raddon’s sound has been arcing in a songwriterly direction for years, and on “Fire & Ice,” he fully settled into a template where he uses the inventiveness of dance and the hit-making aspects of pop.

He collaborated with rising artists as disparate as the ADD-dubstep producer Skrillex, peacocking rock band Neon Trees and the Eminem and Dr. Dre vocalist Skylar Grey, alongside dance-scene singers like Haley Gibby and Becky Jean Williams. His forthcoming single, “Room for Happiness,” rides big washes of synths and Grey’s whispered encouragement — “Don’t be fooled by your emptiness, there’s so much more room for happiness.” “Lessons in Love” has the seductive sonic energy needed on a packed dance floor but with the lyrical self-doubt of an angsty rock band.

“In the beginning, I was so hung up on production, tweaking perfect sounds and spending hours getting the right snare drum,” Raddon said. “Now I’d rather be involved in a song where the words and melody mean more. It took Lady Gaga to really put a light on that, where you can have artistry in a fun dance song. She made the underground pay attention.”

That growing underground may be the biggest development in the live music business.

Dance music has long been the default mode of European pop, and in the last few years American stars have caught up sonically. But the more interesting aspect might be the sweep of festivals like Electric Daisy (which played in Las Vegas this year to bigger daily crowds than Coachella) and young artists like Skrillex and Deadmau5, who became amphitheater-filling stars. Kaskade’s Marquee residency heralded not just a major artist growing his reputation but an entire business model in which dance music is a self-sufficient entertainment attraction in the U.S.

“He was a top priority for us to join the DNA of what Marquee was all about,” said Jason Strauss, co-founder of Strategic Hospitality Group, which manages Marquee and other popular Las Vegas and New York clubs including Tao, Avenue and Lavo.

Marquee, which opened in January, invested $3 million in an LED screen to showcase visuals for Kaskade’s sets, which regularly sold out its 3,000-guest capacity and became an international destination.

Strauss notes the sex appeal of a Kaskade set, citing his singles’ sultry vocals and his “fierce female fan loyalty.” Promoters know that where the women go, money follows. Thus, Raddon can now reportedly demand up to $200,000 a night for tour dates, which require few of the logistical trappings and financial outlays of a touring rock band.

But what about that mission? Dance music is America’s most important new sound and scene, but it’s also still battling a rowdy reputation. The kind it might take a God-fearing, bass-dropping teetotaler to undo.

“It’s still shocking to me to see this acceptance,” he says of electronica’s popularity. “I love this music so much, and I didn’t think this day was coming.”

Ducking through a crowd of tourists at Rockefeller Center, the singer Cee Lo Green took a breather during rehearsals for NBC’s annual tree-lighting concert on Nov. 30. But between a shopping detour at Swarovski Crystal and last-minute talks with the show’s producer, there wasn’t much time to rest.

It’s a pace that Cee Lo, as he is also known, is accustomed to. In the last year, he has won a Grammy Award for a song that became a blockbuster hit despite its unprintable title (officially bowdlerized as “Forget You”), become a celebrity judge on NBC’s talent show “The Voice” and, through a calculated media blitz orchestrated by his managers, broken through as a face of mainstream pop culture after nearly two decades as a cult figure.

To sustain his success, Cee Lo has become one of the hardest-working stars in pop. In the days around the tree-lighting schedule he logged about 20,000 miles taping television shows, recording an album and making personal appearances across the United States and in Britain. One day last spring he managed a promotional trifecta, performing in New York in the morning, Alabama in the afternoon and Las Vegas at night.

“I’m still just a working-class artist, basically,” Cee Lo said of his schedule, as he waited backstage at Rockefeller Center for some hot tea to soothe his well-traveled vocal cords.

Cee Lo — a cannonball-shaped man devoted to the Liberace and Elton John school of showmanship — will earn about $20 million this year. Record sales represent the smallest slice of the revenue pie, according to Larry Mestel, the chief executive of Cee Lo’s management company, Primary Wave Music. The collapse in record sales over the last decade has decimated the bottom line, and a hit song alone is no longer enough to bring in superstar wealth.

So even musicians with multiplatinum success have started looking elsewhere for income, especially to increased touring and the kind of commercial deals that result in Miracle Whip product placement in Lady Gaga videos and Taylor Swift’s performing at a JetBlue airport terminal.

A look at the numbers shows how the economics of music stardom have changed. Born Thomas Callaway, Cee Lo first struck gold in 2005 as producer and co-writer of the Pussycat Dolls’ hit “Don’t Cha”; the next year Gnarls Barkley, his duo with the producer Danger Mouse, reached No. 1 around the world with “Crazy.”

Those hits brought Cee Lo an industry perch but little mainstream name recognition. The pattern might have continued with his third solo album, “The Lady Killer,” which had a modest opening at No. 9 when released late last year by Elektra. By then, however, “Forget You” had already snowballed from an online novelty hit into a pop culture phenomenon, with Gwyneth Paltrow singing it on “Glee.”

“Forget You,” released in August 2010, reached No. 2 and has sold 5.3 million downloads in the United States, according to Nielsen SoundScan, making it the 12th most downloaded track of all time. (By comparison, Adele’s “Rolling in the Deep,” the top song of 2011, has sold 5.7 million.)

But today even extraordinary sales numbers like those translate to limited financial success.

A chart-topping single could once be counted on to drive big sales of full albums, which bring in greater royalties. But the “unbundling” of albums in the age of iTunes — the loss of album sales at $10 or $15 when consumers can buy a single song for about $1 — has contributed to a 58 percent reduction in album sales since 2000. Despite the success of “Forget You,” “The Lady Killer” has sold only about 450,000 copies in the United States.

“How much do you make on five million singles?” Mr. Mestel asked. “It’s not $5 million. Apple takes a piece of it, the record company takes a piece of it, the producer takes a piece of it, and then Cee Lo gets a piece of it as the artist.”

A recording contract for an act like Cee Lo would typically offer a net royalty of about 15 percent, according to several music executives. That means that for a $1.29 download from iTunes, after Apple takes its standard 30 percent fee, the artist would be paid 13 or 14 cents; for five million downloads, that amounts to about $650,000. As one of five writers of the song, Cee Lo would also make about $45,000 in publishing royalties on those downloads.

That leaves him a long way from the $20 million he is estimated to make this year. So to help establish Cee Lo as a household name, Primary Wave has over the last year arranged a steady series of TV appearances and endorsement deals that trade on the singer’s sense of pageantry, good humor and musical catholicity — his “brand.”

The company is made up of many former major-label record executives who have learned to push for unusual marketing strategies. Jeff Straughn, chief executive of the Brand Synergy Group, a partnership with Primary Wave, developed the mini-Elle magazine — featuring actual paid ads — that doubled as the liner notes to Mariah Carey’s last album.

Cee Lo describes Mr. Mestel and Primary Wave with characteristic impromptu poetry: “I would describe Larry as a picket fence around my garden of wildflowers.”

The company was set up in 2006 as a music publisher when it paid an estimated $50 million for a 50 percent stake in the Kurt Cobain song catalog, an anchor that brought in Hall & Oates, Gregg Allman, Steven Tyler of Aerosmith, Def Leppard and others. Primary Wave now controls the copyrights to about 10,000 songs — a minuscule catalog compared with giant music publishers like EMI and Universal, but the company has also established marketing, branding, television and artist management units to exploit songs to their fullest.

In September, Primary Wave’s talent management division merged with Violator, one of the top hip-hop and R&B management companies, adding to its roster major acts like 50 Cent, Busta Rhymes and LL Cool J.

“Most publishing companies look at the world as a place to collect,” Mr. Mestel said. “They hire lots of accountants and royalty people and wait for opportunities to come in. Even though the biggest piece of our company is publishing, we are a marketing and branding company.”

To promote the Hall & Oates catalog, Primary Wave developed an irreverent online cartoon called “J-Stache,” which, like Gogol’s nose, follows the exploits of John Oates’s signature bushy mustache. Once Joe Elliott of Def Leppard heard about it he made a deal for the group’s publishing rights.

“What usually happens when a band signs with a company,” Mr. Elliott said, “is that two years down the road it all goes wrong. But these guys seem to actually sweat for their part. They’re a publishing company, but they’re actively out there working the stuff, banging on doors.”

When Primary Wave took over Cee Lo’s management, shortly before the release of “The Lady Killer,” he still had a relatively low profile as a solo artist. But the company seized on the early viral success of “Forget You” to make Cee Lo a ubiquitous face.

His over-the-top performances at half a dozen award shows — performing with the Jim Henson Company puppets at the Grammys, playing a piano that spun 360 degrees above the crowd at the Billboard awards — proved highly successful. His television campaign for the year has also included “Saturday Night Live,” an appearance on the NBC comedy-drama “Parenthood” and his own talk show on the cable channel Fuse (“Talking to Strangers”).

Primary Wave also booked numerous commercial endorsements for Cee Lo, in traditional TV spots like a 7Up commercial that has been running since October, as well as a Web video series for Absolut Vodka and personal appearances for Duracell and Pretzel M&M’s.

“He has a very strong brand, an unusual look and a great sense of fun,” said Mark Burnett, the veteran reality-TV producer, who signed up Cee Lo for “The Voice” shortly after seeing him on “Saturday Night Live.” “It’s a sense of theatrical, big-scale fun. It’s not just singing. It’s a real show with Cee Lo.”

More television is on its way. Backstage at the last night of “The Voice” last June, he signed a contract with Mr. Burnett for a reality show on British television, “Cee Lo Takes the U.K.,” on which his old group, the Goodie Mob, records a reunion album in London and soaks up the local customs. And next year Cee Lo will follow Celine Dion and Prince to Las Vegas with “Loberace,” a theatrical show to be presented at Planet Hollywood.

With his schedule and his association with various companies and products, Cee Lo inevitably faces two risks: overcommitment and overexposure. After “The Voice” became unexpectedly successful, he had to pull out of a tour with Rihanna.

Overexposure may be hard to judge for an industry that relies on as much promotion as possible. But despite the array of companies Cee Lo has worked with, his representatives say they have guarded his integrity. (“You don’t know how many deals I’ve turned down,” Mr. Straughn said.)

For Cee Lo, turning himself into a marketable brand has been an essential part of his success, even if it does keep him busy.

“There’s security in being a brand; there’s certainty in being a brand,” Cee Lo said. “McDonald’s is a brand. And when you get your fix for a Big Mac, where do you go? There’s only one place you can go for a Big Mac, and that’s big McDonald’s. But my brand has a broader horizon, because my brand is, ‘Whatever you think you want, I just may be able to give it to you.’ ”

HIP-HOP is primarily a celebration of black masculinity. Sure, there have long been significant black female and white male figures, but the majority of the conversation in hip-hop is and has always been about the actions, thoughts, feelings and ethos of black men. But this hegemony cannot last forever. Eventually the throne will have to be shared. The world of hip-hop has some diversity: Eminem, Mac Miller and Nicki Minaj now; the Beastie Boys, Lauryn Hill and Missy Elliott in the past. We have respected rappers of South Asian descent: M.I.A. and Heems from Das Racist. But what about the American white woman? Could she ever rock the mic for real?

The cosmology of American celebrity requires several blond white women be major planets at all times. From Marilyn Monroe to Madonna to Britney Spears to Paris Hilton to Lady Gaga, our culture refuses to allow a void in the job called America’s Favorite Blonde. (Some might say the woman currently holding that office is Beyoncé.) Given that cultural law, how long will it be until some blonde — or any white woman — rises to fame through hip-hop? I daresay it’s inescapable. I’m surprised it hasn’t happened already. Well, it may happen soon. We now have a small movement of white female rappers who want to be taken seriously, including Iggy Azalea, Kreayshawn and K.Flay.

There are too many cultural consumers who love rappers and who love blondes to keep a collision of the two from occurring, especially when the dominant hip-hop consumer is the young white suburban male. Imagine if Pamela Anderson could flow, allowing him to get his hip-hop fix and his soft-core pornography fix at the same time. That would blow his mind.

There is nothing about the skills required to be an M.C. that makes it impossible for white women to rhyme. It’s not that their mouths can’t do it. The true barrier to entry is that there is an essence at the center of hip-hop that white women have an extraordinarily hard time exuding or even copying. For many Americans, black male rappers are entrancing because they give off a sense of black masculine power — that sense of strength, ego and menace that derives from being part of the street — or because of the seductive display of black male cool.

Black women and white men who have been successful in hip-hop have found ways to embody those senses and make them their own. But hip-hop coming from a white woman is almost always an immediate joke. Take Gwyneth Paltrow, for example, showing how much she loves hip-hop by earnestly rhyming the lyrics to N.W.A.’s “Straight Outta Compton” on a British television show or Natalie Portman furiously spitting rhymes in gangsta-rap style on “Saturday Night Live.”

As soon as white women start rhyming, no matter what they say, it’s seen as cute and comical, like a cat walking on its hind legs. Seeing them try to embody the attributes of hip-hop’s vision of black masculinity is a hysterical gender disjunction: they wear it as convincingly as a woman wearing her husband’s clothes.

Even when a talented vocalist like Lykke Li tried to make Rick Ross’s song “Hustlin” her own, she simply could not rise to the level of the song. The sense of danger or cool that black male rappers manifest so easily is hard for white women to display. Of course that won’t stop those who want to rhyme from trying.

If a group of white teenage boys conspired to construct their dream white female rapper they might come up with Iggy Azalea, 21, a sexy rapper with long blond hair, a model’s enticing looks and the detached, hyperconfident air of a dominatrix. She has an aggressive vocal approach and a silky flow. There’s nothing cute or comical about her rhyming. She lives in Los Angeles and grew up in a tiny Australian town idolizing Tupac and Grace Kelly. Now she’s a highly sexual M.C. in the tradition of Lil’ Kim and Trina. If the white women of the world can possibly produce one superstar rapper, Iggy Azalea could be it.

The best song on her mixtape, “Ignorant Art,” is all about her sexual power. It’s title is unprintable. There’s an ominous tone to the song, as if she could kill you in bed or turn you into a hopeless addict. “Hook ’em like crack,” she rhymes. “After shock/Molten lava drop/This should be outlawed/ Call me Pac.” Linking her bedroom potency to the power of the most important name in hip-hop is a bold statement but a familiar gesture in modern hip-hop.

The video features Iggy Azalea in yellow skin-tight, high-waist pants and high heels, flinging her ponytail and licking ice cream suggestively. It was shot in the same sort of South Central Los Angeles neighborhood we saw in the movie “Boyz N the Hood” and in Snoop Dogg videos, placing her in an area that is recognized by longtime hip-hop fans. She raps as she sits on a stoop and dances in front of an ice cream truck, surrounded by black people. The video begins with her eating breakfast as an older black woman watches. Although their relationship is not clear, all this proximity to blackness characterizes Iggy Azalea as a person who is no stranger to black culture and communities, suggesting it’s no anomaly for her to rock the mic.

Strangely, for a video so overtly sexual, she spends a lot of time with a black boy, maybe 6 years old, sweetly draped on her back or playing at her feet or making sexually suggestive moves on a toy horse. Is she bad at baby-sitting or does he represent a man she’s been with and dominated so completely she’s infantilized him? Iggy Azalea is unsigned, but she has high-powered management, so she won’t be for long. Expect a lot of noise to surround her 2012 debut album.

Where Iggy Azalea works at establishing her hip-hop bona fides, Kreayshawn, a 21-year-old from Oakland, Calif., plays with hip-hop signifiers but sees no need to establish her cred. She has black men in her video for “Gucci Gucci” but spends most of it with her white female D.J., who oddly looks like her twin, at her side. The first time I watched “Gucci Gucci,” which has become an Internet sensation with millions of views, my primary thought was “interloper.” Does she really understand or respect what hip-hop’s all about? I doubt it, but if her audience doesn’t, then it won’t hold her back.

She rhymes, “I’m lookin’ like Madonna, but I’m flossin’ like Ivana,” tying herself to rich white women as well as childishly simple rhyme patterns. The song is about a rejection of label worship. She says she doesn’t wear Gucci, Louis Vuitton, Fendi or Prada because everyone does, explaining that she’s liberated from the fashion establishment and able to create personal style without buying it from them. But in the video she hangs out on Rodeo Drive and at a party in a room at the Standard Hotel in Hollywood dancing in front of Warhol-print curtains. She wears a large Minnie Mouse-inspired bow on her head as well as the door-knocker earrings that were stylish decades ago in hip-hop, making her look like a retro caricature.

The song basically attacks a central tenet of hip-hop: Many rappers embrace labelism as part of their celebration of upward mobility as well as a postmodern sentiment that you are the brands you wear. Her rejection of that reeks of white-girl privilege. But similarly privileged people may find her message refreshing.

Kreayshawn has that slow, nasal, staccato, cutesy approach to rapping that you might expect if a white girl was making a rap song as a lark. She doesn’t come across as sexy or even very sexual. She’s more nerd chic. She calls her crew the White Girl Mob (as opposed to Iggy Azalea’s White Girl Team), and in her songs she repeatedly refers to women she loves as “bitch,” making certain we hear her doing what black rappers routinely do, using a pejorative slur in a transgressive way.

At one point in “Gucci, Gucci” she says, “I got the swag and it’s pumping out my ovaries,” which is intended to sound hard core but is kind of gross and self-satirical. She attended film school, so I wouldn’t be surprised if this were part of a guerilla documentary making fun of hip-hop.

More skilled and perhaps more interesting is K.Flay, 26, a Stanford graduate and a talented vocalist who uses rhyming as a sonic technique. Culturally she is not trying to push her way into hip-hop; she’s more of an indie rock chick. Her rapping is melodic and semi-sung, and on her most recent mixtape, “I Stopped Caring in ’96,” she samples indie groups like the xx and the Vines and talks about alienation:

Mind in a permanent state of flux

Mental double Dutch

Had a bag of Cheetos ate ’em up

3 p.m. and I’m still waking up

Wishing I could save myself, but I’m not brave enough.

She dresses like an un-self-conscious hipster, wearing T-shirts and Nike high-tops, little makeup and barely styled dark hair. K.Flay has no black people or hip-hop signifiers in her videos. She represents a generation of white kids who grew up with hip-hop but who weren’t obsessed with it so they feel rhyming is theirs to use without needing to pay homage to the culture.

Does the slight rise of white women pose a threat to the soul of hip-hop? Will this moment be recalled years from now as a crucial step toward the whitening of hip-hop, toward a world in which hip-hop looks the way rock ’n’ roll does: a neighborhood that’s been so completely gentrified that the kids have to be reminded that rock was once a black space? I don’t think so. It will take a lot more than a few white women to fundamentally impact hip-hop, which remains unbreakably connected to the spirit of black masculinity, for which America continues to hunger.

Doug Morris, a non-technologist leader in a technology-led field: ‘You know how you lead this company into the 21st century? You get a lot of hits’
Doug Morris credits his grandson with the inspiration for Vevo, the website that in two years has turned music videos from a promotional expense that an embattled industry was finding harder to justify into a source of digital income that executives talk of in the same breath as Spotify.

Vevo, a venture of Sony Music, Vivendi’s Universal Music and Abu Dhabi Media Company, told the FT this week that it plans to take on MTV by getting music videos and related programmes on to television screens through internet-connected devices or even a channel of its own.

Mr Morris, chief executive of Sony Music Entertainment since this summer, expects Vevo’s revenues to rise from $50m in 2010 to $300m next year, hailing its success as evidence that record labels are not as digitally flat-footed as critics maintain.

It was born out of frustration with music video economics a generation after MTV launched, he says as he recalls finding his grandson consuming music videos online.

“I’m watching him watch In Da Club, [produced] by Dr Dre, and I see all these ads coming up alongside,” he says. Mr Morris, then running Universal Music, asked a colleague how much they were making from the ads and was told: “Nothing”.

He threatened Yahoo, MTV.com and others that Universal would take its videos down if they did not pay up. The tactic worked, but by 2008, when Google’s YouTube had become the dominant online video site, neither side was happy with the revenue being generated.

YouTube was struggling to recoup its music licensing costs, as many advertisers were wary of their brands appearing alongside more unruly user-generated content. “You could have a perfectly professional video of Beyoncé mixed in with two elephants mating,” Mr Morris notes.

Negotiating with Google’s “layer upon layer of engineers” was “like dealing with a wet cloud”, he recalls, until Bono, the U2 frontman, arranged a meeting with Eric Schmidt.

Mr Morris told the Google chairman that Universal could replace poor-quality video copies on YouTube with high definition originals in a slick setting that would appeal to advertisers. He picked Rio Caraeff, Universal’s head of digital music, as Vevo’s CEO, with YouTube providing the technology and sharing advertising revenues.

Mr Morris took the idea to Rolf Schmidt-Holtz, Sony Music’s then CEO, who became his rival’s partner in Vevo. Abu Dhabi Media Company made a small financial investment, EMI made its music available without getting a stake, but Warner Music remains a holdout.

Since the 2009 launch, about 50 videos have racked up more than 100m views, led by Justin Bieber and Lady Gaga hits; more than 600 advertisers have signed up, from American Express to Walmart; and about $100m has been paid out to music companies.

The proceeds rank far behind global digital download revenues, which Gartner estimates reached $3.63bn this year, but Mr Morris says Vevo can be as important a digital business as Spotify and Pandora, which drove subscription revenues to $532m this year.

Vevo has not ended the industry’s clashes with YouTube – this week a US music lobby group declared that Google’s anti-piracy promises “remain unfulfilled” – but Mr Morris says the partners’ interests are aligned.

He also sounds confident that the alliance of Universal and Sony, the clear industry leaders after this year’s auctions of Warner and EMI, will survive. “Joint ventures have their own set of unique challenges,” Mr Caraeff adds, but he insists that he is not planning a sale and has “no interest personally in running a public company”.

Were there to be any initial public offering or deal, Mr Morris says, “it would be important for record companies to maintain some control”. For now, Vevo’s focus is on TV and mobile platforms, and on building revenues outside the US.

It has plans to hire sales forces in France, Australia, Brazil and beyond in 2012 and for Vevo Arabia, a separate venture with the Abu Dhabi Media Company. It is also looking at charging subscriptions for video premieres or an advertising-free experience.

Building Vevo has been “the most fun I’ve had,” Mr Morris says, but he is also keen that it should silence those who doubt music executives’ digital credentials.

“Not being a technologist, I get criticised. People say, ‘how’s he going to lead this company into the 21st century?’ You know how you lead this company into the 21st century? You get a lot of hits. I don’t know why that’s such a hard concept for some people.”

Alicia Keys gave birth to her first child in October 2010, but she barely skipped a beat in the year that followed. In 2011, the “Empire State of Mind” songstress co-directed a short film called Five, co-produced the Broadway debut of Stick Fly, grossed nearly $700,000 per night for a string of live concerts, and still was able to contribute time to Keep A Child Alive, the charity she cofounded.

“A lot of times, people make far more money than they could probably ever even think about what to do with,” she told FORBES this fall. “If you have the opportunity to be able to encourage someone to do something great for somebody else … I think that’s the right way to do business.”

Keys did plenty of business last year—$10 million in earnings, by our estimates—placing her among the ten highest-earning women in music. Yet she finished far behind this year’s Cash Queen.

That title belongs to Lady Gaga, who led the pack with a staggering $90 million total boosted by strong album sales, endorsements and an extremely lucrative world tour. Gaga’s total was more than the combined earnings of No. 2 Taylor Swift ($45 million) and No. 3 Katy Perry ($44 million), both of whom also benefitted from heavy touring and popular albums.

The earnings estimates were compiled with the help of data from Pollstar, RIAA and others, as well as extensive interviews with industry insiders including lawyers, managers, concert promoters, agents and, in some cases, the musicians themselves. The totals encompass all pretax income earned from May 2010 to May 2011, before subtracting agent and manager fees.

Among the top ten earners, there were both newcomers and veterans. Soul sensation Adele pulled in $18 million—a number that only captures a few months of sales for her breakout album 21, making her a likely candidate to return to the top ten next year. Celine Dion may not be quite as popular as her British counterpart, but she banked $19 million on the strength of a wildly popular run in Las Vegas, where her nightly gross ticket sales exceeded $2.3 million.

Yet there remains something of a pay gap in music’s upper echelon. Just five of the women on this list were among the overall 25 highest paid musicians, a list that included 13 male solo acts and 7 bands (only one of those acts, The Black Eyed Peas, had a female member). The time demands of motherhood are commonly listed as a reason for the inequality, but according to Lori Landew, an entertainment attorney at Fox Rothschild in Philadelphia, there’s more to it than that.

“Women artists seem to be less likely to diversify their holdings and to build multi-tier enterprises to take advantage of their success and celebrity,” she says. “What remains unclear, however, is whether this is because these women have less of an entrepreneurial spirit than their male counterparts, which I doubt, or whether they are simply presented with fewer opportunities.”

Landew believes that male artists are approached more for such ventures, as well as movie roles and lucrative endorsement deals. The latter two options, she adds, become even more unattainable to female stars as they age, especially compared to men. Still, bright spots abound.

“There are several notable exceptions,” she says. “One need only look at Oprah or Madonna to know that it doesn’t take a Y chromosome to be a successful entertainment visionary or entrepreneur.”

Another terrific example: The aforementioned Keys, who out-earned entrepreneurial super-producer husband Swizz Beatz by $3.5 million last year.

Nick Gatfield, the recently installed chief executive of Sony Music UK, is reflecting on his brief stint at EMI, where he was a senior executive for two and a half years before heading for the exit in January, just as acts including the Rolling Stones and Radiohead had done before him.

“It was an interesting experience but not one I’d want to repeat,” he smiles. The acquisition of EMI by Terra Firma, the private equity group founded by Guy Hands, has already become the stuff of legend, principally because it was one of Hands’s few botched deals, but also because of the culture clash it prompted between straight-laced bankers and creative music industry types. “You had a private equity group and on top of that, people with ‘fast moving consumer goods’ type backgrounds trying to manage the business as if it was a production line of inanimate products,” Gatfield says. “Taking someone out of Procter & Gamble and putting them in a music company – it’s just an uncomfortable fit.” Consciously or otherwise, Gatfield is echoing the words of the EMI acts who grew impatient with the “suits” who had bought the company. Radiohead’s Thom Yorke said EMI was like “a confused bull in a china shop”, although there were also disputes over money.

“Your ‘product’ is human beings who have opinions,” Gatfield says, leaning forward on the sofa in his spacious corner office at the west London HQ of Sony UK, the company which appointed him chief executive in July. He gives an example. “I remember someone at Terra Firma asking why the [release date for the] Gorillaz album had slipped. I said ‘well, you know, Damon [Albarn]‘s not ready,’ and he said ‘But it’s on the release schedule’”. The art of managing talent, Gatfield says, is to “reduce that slippage” as far as possible, but it’s impossible to treat artists as commodities and reduce the art of making music to a box-ticking exercise. “Terra Firma didn’t like the dark arts of A&R,” he says. “A lot of it is done by gut instinct.”

He adds: “I will give Guy a huge amount of credit because I think some of his instincts were fairly sound [but] the business to him was far more complex than he thought it would be. You’re dealing with the psychology of running a creative business.”

Not all of Terra Firma’s ideas were bad ones, but the manner in which they were implemented was clumsy, he suggests. “There were plenty of ‘foot in mouth’ moments’,” he recalls, adding that the attitude of many of the firm’s executives was that “everyone in the company [EMI] is an idiot”. In fact, “the music industry is populated by very passionate and highly intelligent people. It’s not like everyone’s been asleep at the wheel.”

Like the rest of the industry – Sony included – EMI had been on a long journey, battling structural problems that aren’t easily resolved. Piracy has robbed record companies of revenue. The government’s determination to crack down on persistent offenders by introducing a “three strikes and you’re out” rule in the Digital Economy Act, though welcome, doesn’t go far enough, according to Gatfield. “Broadband businesses are being built on the back of illegal filesharing”, he says. “As high-speed broadband becomes ubiquitous the problem is going to get bigger and bigger. We need site-blocking, and its an incredibly spurious argument for the ISPs to say that they can’t do it because they can do it and they do do it.”

Gatfield complains the letters that will warn ISP customers who download illegal content to desist or have their connection slowed, or even cut off, will not start landing on doormats until 2013. “It’s too slow. It’s onerous, and the lion’s share of the cost … is picked up by the recorded music industry.”

He is relieved that the film and video game industries, along with other content owners, have joined the lobbying effort, however. “That’s a force to be reckoned with,” he says. “I’m an optimist. In the next two or three years you are going to see the business coming out of the trough it’s in at the moment.” The digital revolution hasn’t been all bad, he adds, saying that downloads account for around 35% of Sony UK’s music sales.

“In a weird kind of way this business needed a massive shakeup,” he concedes. “It clearly got bloated on the back of the CD boom. The size of the business didn’t represent the size of the opportunity.”

Now that it has been through a painful process of downsizing and consolidation, his focus is on breaking new acts. “The business has to be less cynical,” he says. “If you have a brilliant piece of music people will flock to it and they will buy it. Quality will out.” He name-checks a few acts, including Chloe and Labyrinth, but worries he has failed to mention others. Perhaps as a musician himself – Gatfield was a member of the 1980s band Dexys Midnight Runners – he is alive to the pressures artists endure. He moved from front of stage to back in 1985 and says his time in Dexy’s taught him invaluable lessons. “Yes, I’ve been in a very successful band,” he says, recalling the global success of Come on Eileen and Too-Rye-Ay, the album the single was taken from. “But I’ve also been an abject failure” [the followup, Don't Stand Me Down, was a hit with critics but a commercial flop] “I’ve experienced quite a lot, albeit sadly, 20-plus years ago.”

He says Too-Rye-Ay, made for £30,000 in a tiny Birmingham studio, sounded far better than its successor, but wonders if the album can survive in the modern music world. In the old days, he says: “You did album sales on the back of the hits. You can’t get away with that now. The album kind of become a default carrier but I think it would be wrong to assume it will be the carrier of the future.” Sony is already looking at 50-track deals or signing new acts that may release just a handful of songs, he adds.

In the US, the company is on a roll, with huge established acts including Beyoncé and Kings of Leon on its books. “To a certain extent it’s been a curse for the company because it has taken its eye off the ball when it comes to domestic A&R,” Gatfield says. “It could hide behind a big American release. The labels have been able to coast a little bit on the success of that.”

That is creating some insecurity with Sony, as label bosses and staff wait to see what Gatfield will do next. A senior executive mutters darkly about the coming reorganisation when we bump into him on a tour of the building and insiders say the new boss has put noses out of joint.

“We have changed the business model because the labels were marketing machines,” Gatfield says. Those functions, including retail and promotional campaigns and price positioning, are all done by a central marketing operation, leaving the labels to concentrate on breaking new acts, he says. “The lifeblood of the business is A&R and new talent.”

He says Sony has a big opportunity now that the big four groups have become three following the acquisition of EMI by Universal, which outbid Warner Music. “Compared to our competitors we are a pillar of stability.”

Sony UK has also been criticised for being over-reliant on the phenomenally successful X Factor franchise. The company co-owns the format with Simon Cowell’s company Syco, which is based at Sony’s London offices, and has a roster of former contestants on its books. “It’s an absolute gift,” he says. “I don’t take it for granted. X Factor-related artists will do about 3 to 3.5m albums in the UK alone this year.”

Gatfield can’t resist adding that the debut single by the winner of The Voice, the American rival to The X Factor that will be launched shortly in the UK by the BBC, sold “around 9,000″ records. What proportion of sales are generated by the show’s talent? “I don’t know the figure off the top of my head,” Gatfield says, “and I don’t really want to share it with you.”

Has the TV show evolved from a talent contest into a soap opera, as some critics claim? “Simon’s view is very much that this is a music discovery show. Of course it happens to be hugely entertaining and the biggest show on TV. It’s the emotional journey people go on – that’s what engages people.” But he rejects any suggestion that the show is exploitative. “Rebecca Ferguson was saying to me she’d written to every record company, every management company – she didn’t even get a reply. She was a single mother at 17, from a tough working-class Liverpool background, a bright girl who became a legal secretary but whose passion was music. As a platform for that I think it’s invaluable.” But will the show’s winner produce this year’s Christmas No 1, as it has so often in recent years? “I think it’ll be the Military Wives,” Gatfield says. You read it here first.

Career 1982 saxophonist, Dexy’s Midnight Runners 1985 joins EMI 1987 A&R director, EMI (signings included Radiohead) 1993 joins Polygram in US, becoming president of Polydor label 2001 president, Universal’s Island division (artists included Amy Winehouse, Keane, Sugababes, Mika, McFly) 2008 president, EMI New Music, North America, UK and Ireland (artists included Tinie Tempah, Eliza Doolittle) 2011 chairman and chief executive, Sony Music, UK and Ireland

Earlier this week I was at 7 Digital’s Annual Media and Partners Meeting. At the start of the year 7 Digital hit their 7 Year mark, which in Internet Years is probably equivalent middle age. 7 Digital now have 3 million registered paying customers (of which 30% are active) but what is most interesting is the impact of mobile downloads on their business. Since launching direct-to-mobile paid downloads the segment has become 7 Digital’s most dynamic growth area: in November 2010 mobile device sales accounted for just 1% of total sales, 1 year on and that share has rocketed to 44%. (Online sales also grew, so this is a case of strong growth in both relative and absolute terms).

Ownership isn’t dead

7 Digital’s CEO Ben Drury used the data shows that ownership isn’t dead. He has a point. In these days of cloud and streaming dominated debates it is easy to be led to believe that ownership is an outdated legacy of the analogue era. Of course in many ways it is, but the unavoidable fact is that we are in a transition phase in which both ownership and access matter and it is a stage which has many years to yet to run.

In simplistic terms there are two key dynamics which determine the pace of the shift from ownership to access:

Technology-led change
Generational-led change

Generational-led change

The generational changes are slowest moving, almost glacial in pace. Yet they give the impression of being quicker than they actually are, because such a small subset of the total population is currently active in digital music. These 10-20% of consumers (of which I and probably you are part) are not representative of the total consumer base. But even among us there are discreet groups. I am of the age group that grew up with CDs. I am part of the transition generation that has enthusiastically adopted digital but still understands the value of physical media and ownership. The Digital Natives however (i.e. those consumers who have grown up in the digital age without ever having learned the habit of buying physical media) have entirely different concepts of ownership. These are the true vanguard of the shift towards access based models. But they are young, so time rich as they might be they are also currently cash poor. Thus they are opting for free alternatives, such as YouTube, Pandora, Spotify Free. Only when they start to acquire increased spending power will they start to be the dynamic force in adoption of paid access based services.

Meanwhile, the digital hold outs – i.e. the majority of the total population – are being left behind as the digital music bandwagon rolls on. Out of habit some of them still buy CDs (some of them even buy a lot of CDs) but most are just falling out of the habit of buying music. Their sense of ownership however remains unchanged. In their world view you either buy music and own it, or you listen to it on the radio or TV. Their worldview remains wholly un-muddied by cloud and streaming services.

Technology-led change

If Generational-led Change is the slow moving backdrop to the access / ownership debate, then Technology-led Change is the fast moving current, the rip tide. It is technological change which underpins Spotify’s conversion of 2.5 million paying customers (Napster and Rhapsody both offered portable rentals years earlier, but not cached streams). It is technological change which Pandora has to thanks for its 100 million users (adoption only truly lifted off with the launch of the Pandora iPhone App). Better technology and better connectivity are making the constraints of access based services less visible.

Yet almost paradoxically Technology (both its advances and limitations) is simultaneously building the case of access and extending the life span of ownership (see figure):

Pay once. Whether subscription fees are hidden or premium, users know that access to content ends when the subscription does. Paying individually for a la carte downloads and CDs might be intrusive and clunky, but the fact remains that consumers know they then have guaranteed lifetime of product ownership. Consumers still ‘get’ ownership and paying (or indeed downloading for free) once and owning for ever is an exceptionally easy concept to communicate. Score: Ownership 1, Access 0
Play on anything. Subscription services have made great strides in device ubiquity, primarily via smartphone apps, but non-smartphone users are left out in the cold, as are non-paying streaming users. MP3 is the common currency of digital music. MP3 files play on virtually every connected device consumers have. Ownership gives the greatest chance of device ubiquity. Score: Ownership 2, Access 0
Play anywhere. Consumers can take their MP3 playing devices with them most places and not have to worry about network connectivity. However memory size restraints often mean they can only take a portion of their music with them. Smart use of local device stream caching is freeing subscription services of the chain of the PC but network connectivity remains core to their value proposition and we are far away yet from the ephemeral promise of ubiquitous connectivity. Score: Ownership 3, Access 0
Play everything. Download stores and CD stores have great catalogue, but access is as metered as it gets. To fill your iPod with paid downloads costs tens of thousands of dollars. To fill it with subscription music costs less than $10 a month. It is in the context of unlimited access to vast catalogues of music that streaming services come alive, leaving ownership casting covetous glances from afar. Score: Ownership 3, Access 1
Share with everyone. Music has always been an inherently social experience (from the earliest prehistoric musicians playing around the fire through to mix tapes). But in the digital age music is massively social. Or at least it is for streaming services. Sharing owned music means making or lending individual copies. For streaming services, playlists, APIs and Facebook place social connectivity at the core of the streaming experience. Score: Ownership 3, Access 2

So it looks like a narrow victory for ownership, but I’d argue that a tie is a more accurate assessment, because ‘Play everything’ and ‘Share with everyone’ are so important that they carry extra weight. These factors are core to what makes music different in the digital age. They are foundations stones for building new pillars of value around music in the digital age.

Ownership and Access will co-exist for years to come

And so we have a situation where the case for Access is building all the time, driven by advances in technology (especially mobile), but those same advances also bring limits which extend the case for Ownership. Mobile is becoming core to the digital music experience, and will only become more so over the coming years. Right now it is simultaneously encouraging people to buy downloads to guarantee portable access of their music as well as allowing subscription users to take their streaming experience with them on the go.

There is no doubt that Access based models are the future of music, but there are many many years yet in which Ownership based models will continue to play a pivotal role. Ownership and Access better learn to get along together, because they are going to be roommates for a long time yet

“Lady Gaga was the first artist in my new management group. When we tried to get her on the radio, every pop station in the country told us no. No exaggeration. They said, ‘This music isn’t top 40, it’s dance.’ So we went around radio. We built relationships with major blogs, like Perez Hilton and Popjustice, and we turned to social-media tools, such as Facebook, Twitter, and MySpace. When Gaga finally broke through [in early 2009], she had a huge fanbase–and a really interesting, intimate digital presence. Now, I don’t want any of my acts to be discovered on the radio. And it seems like the music industry as a whole is replicating that model.”

“The name Big Machine is kind of a joke,” says Scott Borchetta of the record label he founded in 2005, “because really, were anything but.” Indeed, the tiny imprint, which launched with just 13 employees, has taken some of the biggest creative risks in country music, and helped bolster the careers of Rascal Flatts and The Band Perry, among others. Borchetta recently chatted with us about bold marketing, flexible management, and how he discovered a little artist named Taylor Swift. Excerpts below.

Taylor Swift was one of the first artists you signed in 2006. What drew you to her?
I fell in love with her. It’s really that simple. We don’t sign anyone that we don’t think is going to be successful, and Taylor covered so many bases.

But she was barely known–and barely 16–at the time.
She had a really cool website, and she was already was on MySpace–because that’s how she and her friends were talking to each other–but that’s it. So we found ways to light that up and get people’s attention. Everywhere we went, whether it was a red carpet we weren’t supposed to be on, or a radio station, or a television interview, or whatever, I would tell people, “You have to talk to this girl. You’re going to thank me after you do. She’s that good.” We’d walk into a radio or TV station and go, “We have you surrounded, and you don’t even know it.”

How’d that work out?
Early on, we had interest from Great American Country [the cable channel], and we created a program with them called Shortcuts. They were these one-minute vignettes [about Taylor Swift] that ran about 15 times a day. And that’s when MySpace hits and plays just started to blow up. It just started snowballing, and that was a great early barometer to see that Taylor was really sticking, that people were really interested in her.

So at Big Machine, promotion and discovery aren’t always radio-centric.
It’s always funny to me–Internet marketing, social media. I kind of cut those in half: marketing and media. What’s the difference? How do we reach people? Forget about how we do it, how we get to them. It doesn’t matter if it’s social media or radio media or television media–it’s all media, and it’s all marketing. It’s about understanding where your fans are. And when you have infiltrated them, and they’re satisfied, and there’s demand, how do you grow it from there?

But you approach each artist differently, right? It’s not a one-size-fits-all kind of thing?
Right. What we do for Taylor has nothing to do with what we do with Rascal Flatts, which has nothing to do with what we do for Martina McBride. If we’re doing our job right, you’re not going to hear a Band Perry record and go, “Uh, I’m not sure who that is.” I think when we do our job right, our artists don’t sound like anybody else. I have a real hard time with voices that sound like other big voices. You’re not going to hear a Tim McGraw sound-alike on the Big Machine label group. You’re not going to hear a George Strait sound-alike on the Big Machine label group. If I’ve done that, I’ve failed in our initial vision.

So you’re okay with staying small.
I don’t think we’ll ever be a label group that has 25 or 30 acts to it. I don’t want to worry about someone calling me and going, “You better find a way to get another Taylor Swift record out this quarter.” When there’s that kind of financial pressure dictating your path, it’s hard to take creative risks. Unfortunately, for a lot of my friends [at other labels], those kinds of pressures exist, and it does not encourage them to always do their best work.

How do you encourage creativity among your staff?
Everyone is encouraged and expected to be included. There’s no ‘You’re in promotions so you have to do this,’ and ‘You’re in marketing so you just have to do this,’ and ‘You’re in publicity so you have to do this.’ That kind of thinking and paranoia does not work for what we do. It’s a culture of participation. In fact, the best idea we had this year came from a guy in the mailroom–and it’s not a bad thing!

What’s next for Big Machine? Any challenges you’re preparing to face?
There are new challenges every day, but we shouldn’t be waiting for them. I go by the rule of Gretzky: you gotta be there before the puck gets there, or you’re going to get beat. So we’re constantly learning–about how to better protect our music [from piracy], how to be better monetize our music, and how to use to all kinds of media to give the right, deserving artists the right, deserving moment at the right, deserving time.

OLD rock ’n’ rollers don’t fade away. They just hope for a nod from Cleveland.

Specifically, for a nod from the Rock and Roll Hall of Fame and Museum in Cleveland, where the stars who once filled our ears get another shot at immortality, or at least some big money.

With the recording industry under financial attack from many sides, one of the few ways for old acts to pique new interest is to be inducted into the hall of fame. So, each fall, managers and record labels dive into a mosh pit of monster egos, clashing tastes and rival interests in the industry, all in the hope of placing their artists among the royalty of rock. The 15 nominees for 2012 include The Cure, Donna Summer, Joan Jett and the Blackhearts and Guns N’ Roses. Ballots are due on Sunday, and winners will be announced on Wednesday.

For the inductees, the reward can be enormous. Weekly record sales for a performer or band leap 40 to 60 percent, on average, in the weeks after selection, says David Bakula, a senior vice president at Nielsen SoundScan. While winning a Grammy often helps one album, a nod from Cleveland can lift an entire back catalog.

These days, labels and artists need all the help they can get. The music business is worth half of what it was 10 years ago, and the decline doesn’t look as if it will slow anytime soon. Total revenue from shipments of CDs, DVDs and other music products in the United States was $6.85 billion in 2010, according to the Recording Industry Association of America; in 2000, that figure topped $14 billion.

But the path to the hall of fame can be long and difficult. Controversy surrounds the selection process, which is shrouded in secrecy.

What is known is that a nominating committee of about 30 music critics, entertainment lawyers and recording executives winnows the field each year to 15 artists. Then another committee, this one of about 500 people, including past winners, selects five inductees. Artists can qualify for a spot 25 years after their first recording, which means that performers from the 1980s now have a chance to rank up there with Elvis. (The winners to be announced this week will be inducted at a ceremony next April.)

With fame and money at stake, it’s no surprise that a lot of backstage lobbying goes on. Why any particular act is chosen in any particular year is a mystery to performers as well as outsiders — and committee members say they want to keep it that way. The Bee Gees were passed over 11 times before being inducted in 1997; some fans and managers say the long wait reflected an anti-disco bias within the selection committees. And despite 27 studio albums and 45 years of touring, as well as a style that would influence many other artists, Alice Cooper was passed over 16 times before finally being inducted this year.

“When I wasn’t being nominated, I played it down all the time,” Mr. Cooper says. “But it really does make a big difference.”

He continues: “I used to think that when you got in, you’d understand how it worked, and how you get nominated — there would be a secret handshake, and there’d be a dossier about Area 51 and the president’s assassination.”

No such luck.

Rhino Records, which handles his back catalog, took advantage of his induction, however. It ran 30-second spots during the televised induction ceremony and made sure that Alice Cooper compilations, boxed sets and deluxe editions were available at Web sites and brick-and-mortar retailers. Mr. Cooper says the number of young people attending his concerts has jumped. So far this year, sales of his CDs, digital albums and other compilations are up significantly in the United States, to about 115,000 from 75,000 in all of 2010, according to Nielsen SoundScan.

THIS hall-of-fame effect is well established in the recording industry. For instance, sales of Bee Gees albums surged to 1.1 million in 1997, the year of the group’s induction, from 210,000 in 1996. Sales of Fleetwood Mac albums jumped to 3.2 million in 1998, when that band was inducted, from 483,000 in 1997, according to SoundScan.

In 2009, good news from Cleveland bolstered the career of Wanda Jackson, “the queen of rockabilly,” who gained fame in the mid-1950s and 60s. After Ms. Jackson was inducted, she collaborated on an album with Jack White of the White Stripes. Suddenly Ms. Jackson, who is now 74, was everywhere, opening for Adele’s 2011 tour and even rocking out, alongside Mr. White, on the “Late Show With David Letterman.”

“She had a phenomenal and, frankly, deserved refocus on her life and career,” says Joel Peresman, the president and chief executive of the Rock and Roll Hall of Fame Foundation. “I think we give some really deserved artists another chance at the spotlight.”

Their labels get another chance, too. The biggest gains come for artists who, along with managers and record labels, aggressively promote their hall-of-fame status in music magazines and online. Many also rush out or reissue boxed sets, greatest-hits albums and commemorative CD-DVD collections.

“Because of the increased awareness, there’s definitely an increase in sales across their catalogs,” says Jane Ventom, senior vice president for catalog marketing at EMI Music North America.

Bands that split up near the peak of their popularity and then get back together for the induction ceremonies can reap the biggest rewards, because fans often dream of a big reunion tour, à la the Eagles.

“With certain artists, it really gives them another bite at the apple,” Mr. Peresman says.

But this being rock ’n’ roll, things don’t always go smoothly. The Sex Pistols were no-shows at their induction in 2006. When Van Halen was inducted in 2007, fans buzzed that David Lee Roth would get back together with his old band mates and, possibly, agree to a reunion tour. But old squabbles resurfaced, several Van Halen members didn’t show, and Velvet Revolver was brought in to play some Van Halen hits as a tribute.

This year, many in the industry are watching Guns N’ Roses. The front man Axl Rose and the guitarist Saul Hudson, known as Slash, had a fallout during the early 1990s, when the band was at its peak. Speculation is rife that Mr. Rose and Slash might reunite for the ceremony if the band is inducted. Mr. Rose has been playing with a rotating roster of musicians under the Guns N’ Roses name, a move that has sharply divided fans. Big-name managers like Irving Azoff, who successfully reunited the Eagles, have tried and failed to get the original band together.

Mr. Cooper, who is a friend of both Mr. Rose and Slash, says a reunion tour would be a huge hit. The payoff could be tens of millions of dollars, if not hundreds of millions.

“If they got together, they would be selling out football stadiums,” Mr. Cooper says.

Cliff Burnstein, co-founder of Q Prime Management, which represents Metallica and other bands, agrees. “If they announced a tour off of that, it would kill — totally kill,” he says.

Mr. Burnstein has been lobbying this year on behalf of the Red Hot Chili Peppers, who are among the nominees.

Another 2012 nominee, War, is in a similar situation, although on a smaller scale than Guns N’ Roses. War split up in 1986, and several founding members formed the Lowrider Band. War’s lead singer, Lonnie Jordan, who carried on under the original name, hasn’t spoken to his former band mates for years, except in court, but he says that he hopes all of them will show up if War is inducted into the hall.

“We had a great marriage at one time and we made beautiful kids, which is the music,” Mr. Jordan says. “I hold no grudges against anyone.”

Jann Wenner, publisher and co-founder of Rolling Stone magazine and co-founder of the hall of fame, says that most artists put aside their differences when inducted, even if it’s just for a night. The Van Halen fiasco was an anomaly, he says.

Such dramas aside, the big issue for many industry insiders is the selection process itself. Doc McGhee, who manages Kiss, has been particularly critical. He says the hall of fame has had a bias against certain hard-rock bands like Kiss, Bon Jovi and Def Leppard. (Kiss fans have gone so far as to stage rallies outside the hall of fame.)

Allen Kovac, the president of Tenth Street Entertainment, says he had to intervene on behalf of the Bee Gees, who were a client. He called two committee members at the time — Ahmet Ertegun, founder of Atlantic Records, and Seymour Stein of Sire Records — to make a case for the band, a chart-topper in the 1970s.

“There was a great prejudice against one of the best groups of all time,” Mr. Kovac says. “They were being held out of the hall of fame because some guys didn’t like ‘You Should Be Dancing.’ ”

Most bands and managers don’t have that kind of access, and Mr. Kovac says he would like to see the nominating committee overhauled to include representatives from new forces within the industry, like iTunes, Yahoo and Pandora.

Mr. Peresman of the hall of fame says plans are in the works to get the public more involved. The hall recently introduced a feature on its Web site that lets fans vote for nominees. The poll, however, will have no impact on the committee’s decisions.

JON LANDAU, who manages Bruce Springsteen and is chairman of the nominating committee, concedes that the choices are subjective. But he defends the status quo. The hall of fame, he says, recognizes quality and influence, not record sales or flavor-of-the-month popularity.

“I, like everybody else in the room, have favorites,” Mr. Landau says. Committee members, like old band mates, often bicker among themselves. But don’t expect to hear the details.

“We’ve done a good job of keeping the proceedings nontransparent,” he says. “It all dies in the room.”

It is said that those who don’t study history are doomed to repeat it. In the case of the copyright industry, they have learned that they can get new monopoly benefits and rent-seeker’s benefits every time there is a new technology, if they just complain loudly enough to the legislators.

The past 100 years have seen a vast array of technical advances in broadcasting, multiplication and transmissions of culture, but equally much misguided legislators who sought to preserve the old at expense of the new, just because the old was complaining. First, let’s take a look at what the copyright industry tried to ban and outlaw, or at least receive taxpayer money in compensation for its existence:

It started around 1905, when the self-playing piano was becoming popular. Sellers of note sheet music proclaimed that this would be the end of artistry if they couldn’t make a living off of middlemen between composers and the public, so they called for a ban on the player piano. A famous letter in 1906 claims that both the gramophone and the self-playing piano will be the end of artistry, and indeed, the end of a vivid, songful humanity.

In the 1920s, as broadcast radio started appearing, another copyright industry was demanding its ban because it cut into profits. Record sales fell from $75 million in 1929 to $5 million four years later — a recession many times greater than the record industry’s current troubles. (Speaking of recession, the drop in profits happened to coincide with the Great Depression.) The copyright industry sued radio stations, and collecting societies started collecting part of the station profits under a blanket “licensing” scheme. Laws were proposed that would immunize the new radio medium from the copyright industry, but they did not pass.

In the 1930s, silent movies were phased out by movies with audio tracks. Every theater had previously employed an orchestra that played music to accompany the silent movies, and now, these were out of a job. It is quite conceivable that this is the single worst technology development for professional performers. Their unions demanded guaranteed jobs for these performers in varying propositions.

In the 1940s, the movie industry complained that the television would be the death of movies, as movie industry profits dropped from $120 million to $31 million in five years. Famous quote: “Why pay to go see a movie when you can see it at home for free?”

In 1972, the copyright industry tried to ban the photocopier. This push was from book publishers and magazine publishers alike. “The day may not be far off when no one need purchase books.”

The 1970s saw the advent of the cassette tape, which is when the copyright industry really went all-out in proclaiming their entitlement. Ads saying “Home taping is killing music!” were everywhere. The band Dead Kennedys famously responded by subtly changing the message in adding “…industry profits”, and “We left this side [of their tape] blank, so you can help.”

The 1970s also saw another significant shift, where DJs and loudspeakers started taking the place of live dance music. Unions and the copyright industry went ballistic over this, and suggested a “disco fee” that would be charged at locations playing disco (recorded) music, to be collected by private organizations under governmental mandate and redistributed to live bands. This produces hearty laughter today, but that laughter stops sharp with the realization that the disco fee was actually introduced, and still exists.

The 1980s is a special chapter with the advent of video cassette recorders. The copyright industry’s famous quote when testifying before the US Congress – where the film lobby’s highest representative said that “The VCR is to the American film producer and the American public as the Boston strangler is to the woman home alone” — is the stuff of legend today. Still, it bears reminding that the Sony vs Betamax case went all the way to the Supreme Court, and that the VCR was as near as could be from being killed by the copyright industry: The Betamax team won the case by 5-4 in votes.

Also in the late 1980s, we saw the complete flop of the Digital Audio Tape (DAT). A lot of this can be ascribed to the fact that the copyright industry had been allowed to put its politics into the design: the cassette, although technically superior to the analog Compact Cassette, was so deliberately unusable for copying music that people rejected it flat outright. This is an example of a technology that the copyright industry succeeded in killing, even though I doubt it was intentional: they just got their wishes as to how it should work to not disrupt the status quo.

In 1994, Fraunhofer Institute published a prototype implementation of its digital coding technique that would revolutionize digital audio. It allowed CD-quality audio to take one-tenth of the disk space, which was very valuable in this time, when a typical hard drive would be just a couple of gigabytes. Technically known as MPEG-1 Audio Layer III, it was quickly shortened to “MP3” in everyday speak. The copyright industry screamed again, calling it a technology that only can be used for criminal activity. The first successful MP3 player, the Diamond Rio, saw the light in 1998. It had 32 megabytes of memory. Despite good sales, the copyright industry sued its maker, Diamond Multimedia, into oblivion: while the lawsuit was struck down, the company did not recover from the burden of defending. The monopoly middlemen tried aggressively to have MP3 players banned.

The century ended with the copyright middlemen pushing through a new law in the United States called the Digital Millennium Copyright Act, which would have killed the Internet and social media by introducing intermediary liability — essentially killing social technologies in their cradle. Only with much effort did the technology industry manage to stave off disaster by introducing so-called “safe harbors” that immunizes the technical companies from liability on the condition that they throw the end-users to the wolves on request. The internet and social media survived the copyright industry’s onslaught by a very narrow escape that still left it significantly harmed and slowed.

Right after the turn of the century, the use of Digital Video Recorders was called “stealing” as it allowed for skipping of commercials (as if nobody did that before).

In 2003, the copyright industry tried to have its say in the design of HDTV with a so-called “broadcast flag” that would make it illegal to manufacture devices that could copy movies so flagged. In the USA, the FCC miraculously granted this request, but was struck down in bolts of lightning by courts who said they had way overstepped their mandate.

What we have here is a century of deceit, and a century revealing the internal culture inherent in the copyright industry. Every time something new appears, the copyright industry has learned to cry like a little baby that needs more food, and succeeds practically every time to get legislators to channel taxpayer money their way or restrict competing industries. And every time the copyright industry succeeds in doing so, this behavior is further reinforced.

It is far past due that the copyright industry is stripped of its nobility benefits, every part of its governmental weekly allowance, and gets kicked out of its comfy chair to get a damn job and learn to compete on a free and honest market.

A decade ago, Napster’s attempt to set music free was crushed by the music labels. Now, Facebook and Spotify (not to mention Google, Amazon, and Apple) have resurrected the dream. Hallelujah.

Even if Facebook CEO Mark Zuckerberg hadn’t been introduced to Spotify two years ago, it was probably inevitable that the two companies would hook up. The European music service had already won millions of fans, thanks to a business model that allowed music nuts to stream any song, instantly, for free. More important, it made it easy for people to share music with one another. This vision—of music as a social experience—fit perfectly with Facebook’s view of the world, which values sharing over all else. And that’s why, when former Facebook president and Napster cofounder Sean Parker discovered Spotify in 2009, he made a point of telling Zuckerberg about it.

“I’d never even heard of Spotify, but Sean mentioned it to me one day,” Zuckerberg says. “I was like, wow, this person has built a really cool music product and also understands how you can integrate social things in it.” Within a day, Zuckerberg had updated his Facebook status: Spotify is so good.

This brief blessing from the Pope of Poke presaged a turning point for the entire music industry. The original Napster—which let users download practically any song for free—may have died a decade ago, but its ghost still haunts the major labels. Unleashed in a dorm room in 1999 and killed in a courtroom in 2001, it taught a generation that music should be obtained with mouseclicks, not money. Music executives interpreted it differently: Allow people to share music online and they will never pay for it again. For much of the past decade, their attitude toward digital music and licensing has been driven by the fear that showing one bit of flexibility will summon Napster back from the grave to destroy what’s left of their business.

Every one of these young music companies is scrambling to attract Facebook users as quickly as possible.But that’s changing now. In September, after two years of speculation following Zuckerberg’s four-word swoon, Facebook announced an ambitious initiative that lets its users quickly and easily share music with one another—in many cases for free. Facebook worked closely with Spotify, as well as with a dozen other services, and is opening itself up to potentially hundreds more. Now Facebook users will see the songs that their friends listen to, the playlists they compile, and the bands they discover. And they can easily hear all that music with a single mouseclick.

An orgy of free song-sharing seems to be exactly the kind of thing that the horrified labels would quickly clamp down on. But they appear to be starting to accept that their fortunes rest with the geeks. Or at least they’re trying to talk a good game. “I’m not part of the past—I’m part of the future,” says Lucian Grainge, chair and CEO of the world’s biggest label, Universal Music Group. “There’s a new philosophy, a new way of thinking.”

Facebook’s music initiative is only one example of the neo-Napster transformation in which music is streamed from a collection of servers, rather than stored on local hard drives. Indeed, over the past year, every dominant Internet company—including Apple, Amazon, and Google—has ramped up a streaming music service, each one an attempt to reinvent the way we purchase and listen to music. Smaller companies like Rhapsody and the personalized radio service Pandora have championed the streaming model for years; now they are being joined by second-generation services like Rdio, MOG, and Turntable.

Taken together, all of this activity is shaking up an industry that has stubbornly resisted change. The music world has barely managed to process the revolution wrought when songs became files. But streaming subscription services hasten an even bigger upheaval: songs becoming links, playable with one click, from a newsfeed, email, or Facebook profile. The real fun is about to begin.

Daniel Ek, Spotify’s CEO, was barely in high school when Napster sprang up in 1999, and he speaks wistfully of the defunct service as if it were a first love. “My whole life changed,” he says. “Before Napster, I didn’t listen to the Beatles. I didn’t listen to all the guys that are my favorite bands now.”

Ek is a soft-spoken Swede with an egglike dome and a penchant for polo shirts. A product of Scandinavia’s rich hacker tradition, Ek used to head a torrent operation, helping users anonymously swap large media files, before concluding that it would be more efficient to find a legal way of providing that service. He took it for granted that the best way to listen to music was to give listeners unlimited access to an exhaustive catalog of songs, stored on servers and accessible over the Internet. That’s basically what Napster was, except it didn’t stream, it was really slow and often unreliable, and it could get you sued. Ek came up with a different business plan: The bulk of his users would listen for free, but they would have to submit to a few minutes of ads every hour. A percentage would pay for higher levels of service, but even customers who never coughed up a dime would bring in enough ad revenue to be profitable. The labels, in turn, would receive a fraction of a cent every time one of their songs was streamed.

The hyperkinetic Sean Parker describes himself as “a Chinese hamster that has been fitted with an experimental math co-processor, wet-wired into my brain by Ray Kurzweil.”

Spotify wasn’t the first music service to allow customers to stream whatever songs they wanted. But over the past decade, companies that charged subscription fees have been slow to catch on. (Even Rhapsody, one of the best known of these services, has fewer than a million users.) By 2006, Apple’s Steve Jobs was mocking the model. “We just don’t see a demand for it,” he told me that September. “We’ve seen all the subscription services crash and burn. People don’t want to rent their music.” (iTunes, on the other hand, used the same business model that was around when people were buying Al Jolson records: You pay for music, and then you own it.)

Ek would launch his service two years after Jobs rendered his dismissive verdict. During that period, Ek points out, Apple introduced the iPhone, and Facebook became an online superpower. Together, they defined two new domains of digital life—the mobile web and social networking—that would overtake the net. Ek saw that together these breakthroughs could help create the music service he’d always dreamed of. Smartphones meant that people could listen to streaming music while on the go—even in their cars!—instead of being tethered to their computers. And on social networks, people could get music directly from their friends instead of from digital superstores or sketchy pirate havens. “All of a sudden,” Ek says, “you’ve got two new superplatforms.”

Ek set about creating a streaming version of the service he hoped to supersede: iTunes. Like Apple’s online store, Spotify’s design favors simplicity and functionality. It is also just as fast as iTunes, no easy feat considering that Ek’s users don’t play songs from a library stored inches away but from a catalog of more than 15 million tracks that resides on a server sometimes thousands of miles away. “We need to make sure that 95 percent of all streams are delivered within 200 milliseconds, the time it takes the human brain to perceive if there’s any delay,” Ek says. “If we deliver that, people will feel like all the world’s music is accessible on their hard drive.”
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SPOTIFY
Customers can stream unlimited music for free—at first. After six months, the monthly limit drops to 10 hours, at which point Spotify hopes users will pony up for a subscription.

MOG
The latest version of the streaming music service allots a set amount of music that users can listen to for free. They can earn more free tunes by sharing songs and playlists.

EARBITS
This free streaming online radio service isn’t supported by advertising. Instead, it plans to charge artists to promote themselves while listeners check out their music.

IHEARTRADIO
With this Clear Channel app, users can tune into broadcasts from 750 radio stations or tailor stations to their own taste for free. No commercials—at least until the end of the year.

TURNTABLE
This free service operates as a virtual venue for DJing. Users vie for points by creating crowd-pleasing playlists for other avatars in genre-themed listening rooms.

RHAPSODY
The godfather of streaming music charges $10 a month to listen to tunes on one phone or MP3 player. Pay a few bucks more to add additional mobile devices.
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But Spotify’s ultimate feature—the one that suggests just how radically our listening habits may be about to change—is its social tools. Gustav Söderström, Spotify’s chief product officer, explains that its free model acts as a catalyst for social discovery. With iTunes, you have to pay to hear a song that a buddy has recommended, even though it might be a dud. “Those costs prohibit discovery,” Söderström says. “If there was a cost for checking out a new video on YouTube, you would not sample a lot of videos.” With Spotify, there’s no cost barrier, making it much more likely that people will sign up and start listening. Once they do, friends can simply drag songs or entire albums into one another’s inboxes. And links to songs can easily be posted online.

Ek understands that the future of Spotify hinges on its social aptitude; the more people come to rely on the service for recommendations from their friends, the more likely they’ll get hooked and eventually pay for the premium version. (In the US, it costs $5 a month to turn off the ads and $10 for a version that also works on mobile phones and allows offline listening.) “Our job is to try to get you to share as much music as possible and to get recommendations from your friends,” Ek says. “The more we can do that for you, the better it is for us as a business.”

Most people know Sean Parker as the guy that Justin Timberlake portrayed in The Social Network, an association that Parker professes to hate. Still, even Timberlake’s portrait of jittery energy is insufficient preparation for the hyperkinetic presence of the real thing; Parker is so brainy and intense—he delivers mile-a-minute, shockingly well-informed improvisations on everything from molecular biology to enology, with nary a caesura—that it’s a kind of superpower. (Parker’s own self-description can be found on his Facebook profile: “I’m a Chinese hamster that has been fitted with an experimental math co-processor, wet-wired into my brain by Ray Kurzweil. I also have an empathy chip.”) His résumé is both impressive and harrowing. He holds a 4 percent stake in Facebook—currently worth billions—a company he was pressured to leave after a bogus drug bust. He cofounded the online address book service Plaxo before board members forced him out.

But one of Parker’s greatest regrets has been his inability to realize the vision he had for Napster, which he cofounded in 1999. The fledgling company was trying to establish itself as a legitimate business while fending off a new file-sharing rival called Gnutella. At the time, the system involved multiple music servers—users could pick one of several locations from which to download their songs. Parker thought that Napster should centralize, arguing that it would make it easier for users to find each other. As Joseph Menn wrote in All the Rave, a book about Napster published in 2003, “Parker imagined the system would allow users to post personal profiles, showing what music they had available, what they were listening to most, and what they had been playing most recently. If another user downloaded a file from that person, they might want to see what else the person was interested in.” Parker told Menn back then that this would “usher in a golden age of music.”

A barrage of copyright-infringement lawsuits prevented Parker from fulfilling that dream—until he came upon Spotify. He wrote a 1,700-word love letter to Daniel Ek. “To create the next revolution in digital music I believe that you must both meet and exceed the bar set by Napster a decade ago,” he wrote. “You guys have finally done it.” Ek wrote an eager response, and Parker eventually become an investor in Spotify (through the Founders Fund), a board member, and an ambassador to label executives and musicians. “We never intended to break the music industry,” he says of his Napster exploits. “We were just the forcing event that accelerated that whole process.” Now, he says, he hopes to restore what he helped destroy.

After Parker wowed Zuckerberg with Spotify, the two companies began trying to figure out the best way to put music into Facebook. But Zuckerberg was already thinking beyond Spotify—even beyond music. Facebook, having amassed one of the largest audiences in human history, was shifting its energies. Now that it had successfully connected so many people, it could concentrate on making the network a social hub for more of the activities they participated in every day. It was all part of the grand strategy that Facebook calls the Open Graph, an initiative that allows developers to create services that let people share everything—not just photos, messages, and status updates but movies, books, news articles, and so on.

Still, music was destined to be a big part of Facebook’s strategy. “Music is such a great example of this, because it’s uniquely tied to people’s identities,” Facebook CTO Bret Taylor says. “People wear T-shirts with their favorite groups on them—in high school I had patches on my backpack of all the punk bands I listened to.” If Facebook had access to people’s listening habits, it could seamlessly make music a part of their online identity as well—storing a complete log of what everyone listens to and making that information available to their Facebook friends.

And just as Facebook empowered developers—like Zynga—to create social games, the company hopes to empower developers to create social music. “There’s no way Facebook is going to ever build those services itself,” Zuckerberg says, “so we’re trying to enable an ecosystem of developers to build great experiences in different areas.” When it comes to music, this is a particularly clever approach, as it avoids the mishigas that has plagued every other tech company that has become entangled with the music industry. Since Facebook offloads the actual streaming to its partners, there’s no need to negotiate licenses with music industry honchos. “We’re not trying to make a music product,” Zuckerberg says. “We’re trying to make something so that people can learn stuff from their friends and can share with them and express themselves.” But users may not make that distinction—Facebook certainly feels like a music service now. Without signing a single contract, it has suddenly become the place where people share new songs with one another.

The digital world has not been kind to artists, decimating royalties and reducing their gorgeous album covers to thumbnails.Spotify had to accept the fact that it wouldn’t be Facebook’s only musical friend. “We were up-front from the very beginning,” Zuckerberg says. “We said, ‘It was cool to talk to you guys, and we want to build something, but this is going to be an open platform, and we’re going to work with your competitors.’” Last spring Facebook began talking with companies like Rhapsody, Rdio, and Pandora—and even to smaller ones like Earbits, which had launched as a Y Combinator startup around the same time.

By giving these services access to its 800 million users, Facebook has set in motion a gold-rush-level frenzy. Network effects dictate that only a small handful of services will dominate—once a service begins to take off, its popularity becomes self-reinforcing—and so every one of these young music companies is scrambling to attract users as quickly as it can. Each of them is carving out a unique strategy to navigate the rush. “It’s like going from Route 66 to a major highway,” says David Hyman, founder and CEO of MOG. His plan: a free service for users who spread their song choices far and wide—and bring in more MOG customers. When you join, you are assigned a “gas tank” with a certain number of songs in it—if you share promiscuously, MOG will top off your tank. “The amount of free music you can get is based on how many friends you have,” Hyman says. “If you’re really viral, you’ll never have to pay. Real tastemakers will get free music forever.” If it works, he says, MOG could have a “Zynga-like viral effect,” with Facebook catapulting his company to stardom.

Models like MOG’s could also promise to change the way music is discovered and distributed. The hottest music startup of 2011—web service Turntable—has also developed an Open Graph application. Turntable is a cross between Internet radio, Second Life, and those 2 am dorm-room sessions where kids compete to see who has the coolest music collection. As many as 200 users pile into themed music rooms, where up to five DJs compile playlists from a large online library or by uploading their own tunes. The crowd favorites get points, but the real fun is hanging out and hearing new songs in real time while typing out SMS-like trash talk. “We see ourselves as this discovery platform that’s better than anything out there, because it’s human-curated,” CEO Billy Chasen says.

But if any of these rival services are to triumph, they’ll have to outdo Spotify, which is perfectly tailored to the new Facebook platform. While specifying that Facebook is playing no favorites, its VP of partnerships and platform marketing, Dan Rose, cites two aspects of Spotify that might give it an advantage over its rivals. “One is, they certainly have gone the deepest and furthest in making their product social from the ground up. And second, they have a business model that may be really aligned with the kind of social discovery and serendipity that our platform is designed to enable. If I see that you’re listening to a song or an album or an artist and I want to hear it, I can do that with very little friction using Spotify.”

And for free! At least for a while. Spotify’s new users can listen to their favorite songs over and over and can use the service as much as they like. But after six months, if they don’t want to pay, they can play a given song only five times—and listen to a total of 10 hours of music—per month. “We’re going to have this six-month period where the user gets to bake in the system, gets to build their library, build playlists, become addicted to the experience, to the point where they want that experience with them everywhere they go,” Parker says, sounding a bit like a drug dealer who gives away free samples, “at which point they’re much more likely to subscribe.” Spotify’s competitors have another view. “How free is free when it’s not free forever?” asks Rhapsody CEO Jon Irwin. “If I could listen to ‘Paint It Black’ only five times, I would cry.” Meanwhile, Rhapsody is jumping on the social bandwagon—the week before the Facebook announcement, it launched “a remixed and remastered experience” that puts its users in touch with each other. And Rhapsody, too, is integrated into Facebook.

Music icon Trent Reznor isn’t sold on the idea of social recommendations. “I don’t care what my friends are listening to. Because I’m cooler than they are.”

To fight Spotify, even services that depend on paid subscriptions may choose to create their own freemium offerings. Rdio, for instance, has resisted offering a free version, but at press time, CEO Drew Larner was close to introducing one. “The issue is how to dole out free in a way that makes sense,” he says. “And then getting a goodly number of people to convert to paid so that we can pay our bills.”

Meanwhile, the tech superpowers—Google, Amazon, and, of course, Apple—all have their own plans, each geared to their respective strengths. Google’s Music Beta product—a free service that lets users stream music that they’ve uploaded to Google’s servers—is tellingly located in its Android division, suggesting that Google plans to offer an alternative to the iTunes empire. (Though Google hasn’t released details, the company has also hinted that it will allow people to share music on Google+, its new social network.) Amazon also allows people to store their music purchases in the cloud and may eventually develop a plan that competes with the subscription services. “We’re not tied to any one business model,” says Bill Carr, Amazon’s vice president of movies and music. “If we were, we’d still be only a book retailer.”

And ever since Apple bought Lala—a music startup with a business plan similar to Spotify’s—in 2009, observers have suspected that a subscription version of iTunes is in the works. Unlike Google’s and Amazon’s cloud music services, which require users to painstakingly upload songs to a distant server, Apple used its clout with the music industry to create iTunes Match, a service that automatically stores iTunes purchases on Apple’s servers, where they can be accessed by many devices, for $25 a year. That may well be a down payment on a streaming version of iTunes. Ultimately, the effect of all these cloud services might be to clear one of the highest hurdles to a streaming subscription future: the psychological attachment that people have to owning their music. Once songs live in the cloud—and customers pay rent to store them—it’s a small step to do away with the concept of ownership altogether.

A few days before Spotify’s July 14 US launch, Sean Parker is engaged in one of the numerous unofficial tasks he performs for the company: pitching the service to performers, songwriters, and agents. Parker’s temporary headquarters this evening is a cabana at the Peninsula Hotel in Beverly Hills, the waters of the rooftop swimming pool rippling in the twilight. Joining Parker is Spotify “artist in residence” D. A. Wallach, a redheaded Wisconsin kid with a Harvard degree who sings in a group called Chester French.

With all the attention on services, labels, and customers, it can be easy to overlook the most crucial players: the people who actually make the music. The digital world has not been kind to them—it has decimated their royalties and shrunk their gorgeous album covers to thumbnail size. But in the race to own social music, they have become valuable assets—brands that can bring their fans to whichever service they get behind. Now Parker is eagerly seeking their endorsement, hoping that their participation will lure followers.

After schmoozing with Smashing Pumpkins’ Billy Corgan and superproducer Dr. Luke, Parker takes an audience with industrial-metal icon Trent Reznor. If Parker harbors any hard feelings toward Reznor, who cowrote the Oscar-winning score of The Social Network, he doesn’t show it. Reznor wants to make it clear that while he likes new ideas, he’s still nostalgic for the predigital age. “I’m 46,” Reznor begins. “I came to digital reluctantly. I still have the romantic idea that vinyl and record stores matter. Digital isn’t the same as smelling the vinyl and lowering the needle or complaining that your girlfriend is scratching the record.” He’s also not sold on the idea of social recommendations. “I don’t care what my friends are listening to,” he says. “Because I’m cooler than they are.” Finally, he discusses the old business model where musicians like him didn’t have to tour so much and could live on royalties.

Parker is sympathetic. “It’s up to me to create a model where that can happen,” he says. Combining the viral nature of Spotify with Facebook’s 800 million users, he argues, will result in “the ubiquitous music distribution plumbing for the entire Internet.” Digital economics have transformed other industries and created huge wealth. “That economic power has never applied to music before,” he says. Now it will. When music is exchanged freely as links—and a business model silently racks up tiny micropayments for labels, ostensibly paid for by hundreds of millions of monthly subscription fees and millions of ads—the measly profits that the current music industry reaps will get much less measly.

By the end of Parker’s spiel, Reznor is enthusiastic. “I’m on board,” he says. “You can be the great radio station of the world.”

Spotify may not get there on its own. But taken together, these services could create something even grander—a global music infrastructure, where any song is just a click away. And they might finally exorcise the ghost of Napster.

Over the summer, Steve Stoute, the CEO of the brand-marketing firm Translation, went to Wimbledon with his friend and business partner, the rapper Jay-Z, to cheer on Rafael Nadal during the Spaniard’s fourth-round battle with Juan Martín Del Potro. With the match tied in the third set, BBC cameras spotted them. “The man is still here,” said BBC tennis analyst Boris Becker in his heavy German accent. “The Jigga Man, that’s what they call him—Shawn Carter.”

Where most viewers saw a star-sighting. Mr. Stoute saw a “tanning moment.”

Mr. Stoute, in his recent book The Tanning of America: How Hip-Hop Created a Culture That Rewrote the Rules of the New Economy (2011, Gotham Books), defined “tanning” as “the catalytic force majeure that went beyond musical boundaries and into the psyche of young America.” That’s a pretty thick slice of marketing-speak, but the gist of it is simple: hip-hop has radically changed culture and corporate America.

And Mr. Stoute has had a central role in the transformation.

“That wouldn’t have happened 10 years ago,” Mr. Stoute said of Becker’s acknowledgment of Jay-Z. “Prince William was there that day, and for Jay-Z to get recognized at that setting, yeah, it’s a tanning moment.”

Around the turn of the millennium, Mr. Stoute, then a successful record company executive, made a gutsy career change. He left his lofty position as president of urban music at Interscope/Geffen/A&M Records and dove into advertising and marketing. He is now the go-to guy for Fortune 500 companies chasing the youth and urban markets. Mr. Stoute paired Allen Iverson with the gritty rapper Jadakiss for a beloved Reebok commercial; he got Justin Timberlake to record a McDonald’s jingle; and he tapped Jay-Z for a Hewlett-Packard campaign. (Before Mr. Stoute’s involvement, HP had been circling Robert Redford and Drew Barrymore.)

Translation’s specialty is “collaborative strategic consulting,” but Mr. Stoute sees his role in somewhat simpler terms.

“I just try to tell the consumer truth,” he told The Observer.

It should be noted, however, that consumer truth isn’t always the same as gospel truth. That Justin Timberlake jingle, for instance, was originally released as a song. Only after the world was humming “I’m Lovin’ It” did McDonald’s introduce its new tagline, with JT as its spokesman.

It’s been an effective strategy. In November 2008, Mr. Stoute was inducted into the American Advertising Federation’s Hall of Achievement. And according to Ad Age, Translation, which operates under its parent company Interpublic, pulled in $9 million in revenue in 2010.

On a recent Tuesday afternoon, Mr. Stoute was sitting on a couch in his Times Square corner office. Although he known as a bit of a dandy, on this occasion he was clad in gym clothes—a black V-neck T layered over a white V-neck, gray athletic shorts, black ankle socks and no shoes. The wall was plastered with photographs of Mr. Stoute with his many famous friends, and framed photos of icons such as Sidney Poitier and Muhammad Ali.

Mr. Stoute began the conversation with one of his favorite “tanning moments”: The story of how Jimmy Iovine landed a Rolling Stone cover for Dr. Dre and Snoop Doggy Dogg in 1993. “That was Jimmy Iovine walking in and saying, ‘Jann, these guys are rock stars. They are Mick and Keith,’” Mr. Stoute said. “It takes a guy like Jimmy Iovine—he had so much rock ’n’ roll credibility from U2 and producing Patti Smith. Who else is gonna do that? Russell Simmons? They weren’t going to listen to him.”

Mr. Stoute would like to see more magazines adapt the way Rolling Stone did. “All those magazines are fucked up like that. Vogue is the same way. It’s all those people that come from the old school and believe that [hip-hop] wasn’t sustainable, so therefore they don’t want to buy into it and they push back on it. Vogue did the exact same thing. Anna Wintour now hangs out at Kanye’s shows and hangs out with Pharrell and hangs out with Puffy. She does all that shit now. Meanwhile, there is a lack of African-Americans who have graced that cover. Now, all of a sudden, it’s Beyoncé, it’s Rihanna. Now, she’s sitting with Nicki Minaj [at the Carolina Herrera Spring 2012 show].

“She’s tanning because she has to,” he continued. “She has to. She’s gonna put Blake Lively on the cover again?”

Mr. Stoute, 41, was born in Queens Village, the son of Trinidadian immigrants. His father was a marine engineer; mom was a nurse. He spent his formative years grinding away at after-school jobs—he shoveled snow, erected tents at flea markets, delivered the New York Daily News and Newsday, sung Christmas carols and hawked fire extinguishers—but dreamed of being a professional football player. He was a starting running back at Holy Cross High School in Brooklyn, but began hunting for a backup plan after separating his shoulder. His father suggested becoming an auto mechanic. Mr. Stoute remembers his father’s reasoning: “It’s a craft that they can’t take away from you,” he said.

Instead, he bounced around five colleges and began working in real estate, signing homeowners up for mortgages—this was back in the early 1990s, well before the boom and eventual bust. He then left the mortgage market after realizing he could earn more in the music industry. It wasn’t about his love for the music, he said, unabashedly. “No, it was opportunity,” he said. “[Hip-hop] was blowing up. In ’91, ’92, the arrow was pointing in one direction.”

Through mutual acquaintances, Mr. Stoute hooked up with comedy rappers Kid N’ Play and quickly became the duo’s road manager. But his big break occurred in the mid-1990s, when he started managing the rapper Nas. Under Mr. Stoute’s guidance, the Queensbridge emcee adapted a more commercial, radio-friendly sound. The strategy worked. His 1996 album It Was Written was certified double-platinum, but finding the right balance between art and commerce proved challenging. “Managing Nas taught me a lot about respecting artists,” Mr. Stoute said. “You got a crash course in that because you were dealing with a guy who, money didn’t matter to him. Nor did success. He could have been in The Cider House Rules—he didn’t want to do it.” Mr. Stoute shook his head. “Brands were calling—he didn’t show up for some shoots. Nas wrote songs on the Men in Black soundtrack. He could have wrote the whole album for Will Smith but he didn’t want to show up to the studio to write records for Will Smith.”

Men in Black was a huge hit. The movie grossed $587 million worldwide and the soundtrack, which Mr. Stoute executive produced, was certified triple platinum. He was more impressed, however, by the success of a product placement—sales of Ray-Ban sunglasses shot up 500 percent after being promoted in the film.
By the late 1990s, with the advent of file-sharing and mp3s about to turn the music industry on its head, Mr. Stoute decided to change careers. In 1999, he partnered with renowned adman Peter Arnell—best known for the iconic DKNY campaign—to form the marketing company PASS. (The company couldn’t obtain certification as a minority-owned business and in 2002 was sold to a Hispanic agency, Cultura; Mr. Stoute remained chairman until 2003.)

Mr. Stoute was a quickly adapted to this new world. “Steve Stoute has the best instincts creatively and strategically on pop culture, marketing and youth of anybody I’ve ever met,” Mr. Arnell told Adage.com. (Mr. Arnell’s own instincts were more questionable; he was the force behind the disastrous 2009 Tropicana redesign.)

“Steve is an open person,” former Reebok CEO Paul Fireman told The Observer. “He sees himself on a long journey on which he keeps meeting people and building strategic pieces along the way.”

“He’s curious about everything,” added Vanity Fair editor in chief Graydon Carter, a friend who wrote the foreword to Mr. Stoute’s book. “He’d ask about your clothes. He’d ask about what you’re doing. He set about making himself into something and, God knows, he did it.”

Steve Stoute has strong opinions on branding. He was offended, for example, by what he considered the ham-handedness of Kodak’s recent campaign featuring Rihanna and a slew of other musicians.

“Marketing? You call that marketing?” Mr. Stoute asked. “You’re trying to skip the entire process and just hire some celebrities to save your ass. That’s the epitome of ridiculous. Marketing? Kodak?” He was nearly shouting. The commercials, he said, didn’t convey the function of the product. “Can you imagine how stupid that is? What am I gonna do with a Kodak? It’s not a smart phone. If I don’t tell you why you need it, why would you buy it? Because Rihanna and Pitbull said so? Yeah, congratulations.”

The Kodak campaign was “of limited duration,” according to a company spokesperson and was only for the So Kodak line. “Our data showed that it was effective in raising brand and product awareness among the target audience.” It also won an Addy Award, “so obviously some difference of opinion out there,” the spokesperson added.

He can be just as brutal with potential clients. Back when he first partnered with Reebok, he told Paul Fireman flatly that the company couldn’t compete with Nike by marketing their shoes as superior for athletes.

“I think most people, especially when they are interviewing, tend to not be as forthright as I would like,” Mr. Fireman said. “Most of them think that by telling you what you’re doing wrong they’re going to insult you. Steve pointed out our disconnect from the consumer. He is very blunt but not rude. You’re either going to accept it or you’re not. I thought it was refreshing.”

Mr. Stoute is most proud of having pioneered the practice of surreptitiously embedding marketing messages into the pop cultural products. He followed up the successful McDonald’s-Timberlake switcheroo with a similar deal involving Wrigley’s and Chris Brown. After Mr. Brown’s song “Forever” became a hit, it was revealed that the familiar lyric “Double your pleasure” was no coincidence—the song was a gum jingle. Before radio stations, deejays or average listeners knew they were all offering free advertising time—and mindspace—to a major corporation, the song was embedded in the culture.

Mr. Stoute was a bit perplexed by the anger the stunt engendered. “If you got upset because it was really a brand message intertwined with the song you loved, if that bothered you, shame on you for getting that emotional about something you loved anyway,” he said. “I didn’t understand that. Gawker and all those guys were writing stuff about me. Say anything you want, but its brilliant, it’s absolutely brilliant. It’s stunning. It’s so smart. You actually made a song and in the song, it said, ‘Double your pleasure/double your fun.’ And that worked. And then we came back with a commercial behind it and when it was revealed, it was a home run.”

Mr. Stoute then looked at his phone. It was almost 6 p.m. “I gotta get ready to get out of here,” he said. He had tickets that night for The Mountaintop with Samuel L. Jackson and Angela Bassett.

“If you thought the song was sponsored by a brand,” he added, “you would not have been open-minded about how the song made you feel. All I did was remove that filter.”

EMI is the latest victim of a decade of severe record-industry contraction. Labels peaked in 2000, selling more than 785 million albums, but Internet piracy and the shift from high-profit CDs to low-profit digital singles have forced thousands of label layoffs and drastic artist-roster cuts. At the same time, new power centers have emerged in the music business, including Live Nation, the concert behemoth that merged with Ticketmaster last year; Apple, which has grown into the biggest music retailer; and a new generation of do-it-yourself artists, from Radiohead to Wilco, who have left the majors behind.

The purchase by Universal, the group that controls labels including Interscope and Def Jam, will make the planet’s largest label more dominant than ever. The company’s market share is set to expand from roughly 27 percent of worldwide music sales to 36 percent, compared to Sony’s 23 percent and Warner’s 15 percent. Proponents argue that Universal’s powerful distribution network will give EMI artists greater international reach, while EMI’s Nashville label, whose artists include Keith Urban and Brad Paisley, will help Universal address its weakness in country music. “It’ll give artists signed to EMI an opportunity for growth while at the same time allowing Universal to put out more music than ever before,” says a source with knowledge of the sale.

“It’s a big deal,” adds former Sony and Warner executive Steve Greenberg, now chief executive of independent label S-Curve Records. “If fewer players have the ability to be strong companies, that just may be the only system that’s viable for the time being.”

Sony has been making aggressive moves as well. Doug Morris, who grew Universal into the top major, took over the label in July after 15 years at Universal. Notoriously competitive, Morris recently signed producer Dr. Luke to run a new imprint, Kemosabe. In addition to locking up Luke’s hitmaking talents, the deal prevents him from working with non-Sony artists (including his main collaborator, EMI’s Katy Perry). Sony has also offered $2.2 billion to buy EMI’s publishing division, which owns the copyrights to 1.3 million songs, by Rihanna, the White Stripes, Sting and others – and may end up being more lucrative than the labels Universal bought. “He’s taking out his proven playbook and going at it again with a real fervor,” a source says of Morris’ deals. “It’s classic Doug Morris.”

Despite competitors’ fears, the deal at least gives EMI a future, which had been uncertain for a decade. Private equity firm Terra Firma Capital Partners bought it in 2007, but when it defaulted on a $5.4 billion loan, Citigroup took over the company earlier this year. “How effective was EMI in signing new artists the last few years?” says the source with knowledge of the sale. “They said in their own statements they’ve slashed A&R.”

Both the label and publishing sales are expected to be approved in eight to 10 months. In the meantime, EMI executives have said they plan no short-term layoffs – although eventual staff cuts are all but inevitable, as the combined companies eliminate redundancies. “We’ve been assured that the commitment and investment will remain,” says Caroline Prothero, manager of EMI dance-music star David Guetta. “I want this situation to allow new artists to come through, and I want the people that have worked with us to keep their jobs.”

The Beatles will sell millions no matter which label owns their catalog, and Perry and Coldplay have nothing to worry about. The fate of smaller artists is more uncertain – several managers of well-known EMI artists tell Rolling Stone they are concerned about what will happen to their clients’ upcoming records. “There’s going to be nothing left of EMI,” says one music-business source. “Which means smaller rosters, less artist development.”

But given the reduced power of the majors, many in the business are surprisingly unfazed. “It’s just another merger,”says Bob McLynn, who manages acts from Train to Hole. “You have to work with your artist and soldier on and not worry about the surroundings.”