Discs, downloads and democracy

Saying that no one pays for music anymore ignores that 95% of it is in the hands of the big four rec

Rock-music lovers have been pirating music from the recording majors for generations. In the 1960s and 1970s, when rock really took off, the Grundig tape recorder was widely used to copy LPs from radio stations for friends.

Eventually the recording companies became fed up with this wholesale theft and produced their own, "higher-quality" tapes in swish plastic boxes, at affordable prices, with add-ons such as the words of the artist. Similarly, with the arrival of PCs and the ability to record digitally, the overpriced CD enjoyed a fantastic run.

Now we live in the age of digital downloads and the familiar refrain among young people is that no one pays for music any more.

Follow this argument through, and you might think that the big recording firms - Universal Music, Britain's EMI (home of the Beatles and Coldplay, among others), Warner Music and Sony BMG - were dead meat. They have been too slow to recognise the iPod revolution and will pay dearly as the democracy of the internet takes control. Maybe. But this overlooks the fact that some 95 per cent of the music consumed is in the hands of the big four. This does not mean that they don't have to adjust, or that there aren't certain artists who now believe they are bigger than the companies that discovered them, backed them, marketed their wares and made sure their recordings were sufficiently promoted and played to reach the top of the charts. When, on 16 October, Madonna announced that she was abandoning Warner Music in favour of a £60m deal with Live Nation, the industry hailed the move as revolutionary.

Under the deal, rights to Madonna tours for the next five years will be owned by Live Nation; the artist herself would receive a £9m signature fee and £8.5m in cash and shares for each of the five new albums to be released as part of the ten-year deal.

In a separate go-it-alone deal, Radiohead said they would be ditching EMI, now owned by Guy Hands, the British private equity boss, and go it alone on the internet. And they would offer consumers the chance to pay what they wished when they downloaded the new album. All of this sounds very revolutionary - artists rebelling against big enterprises that have trapped them in their net.

Yet, in real terms, it is hardly very different from when the Beatles ditched EMI to create Apple, or when Madonna set up Maverick Records in the early 1990s, only to sell it back to Warner a decade later.

This is not to say that the download generation is not changing the music business and causing rapid readjustment. The recording companies have sought to draw lines in the sand to protect their intellectual property.

They have taken to the courts, winning dozens of high-profile cases against "file-sharing" companies that have breached copyright. And they introduced "digital rights management" (DRM), under which albums are given a protective e-wrapping that is designed to stop them being stolen and sent on to friends.

Such attempts to control the market tend to the temporary. EMI was among the first to break rank when it announced in April that it was abandoning DRM and would make its recordings available on the web, for a premium price. Universal Music has been experimenting similarly. To meet this more open marketplace, the biggest retailers, Amazon and Wal-Mart, have started selling equipment that does not need the DRM software to download.

One reason for the experiments by EMI and Universal is to challenge Apple, the dominant player in downloads. Apple's FairPlay site negotiates low-price deals with the record companies. So will the fightback work?

Certainly, there is room for breakaway deals like that of Madonna. Yet there is a view in the industry that Live Nation has paid too much for a single performer. The reality is that new artists, with rare exceptions, cannot go it alone on the internet. They need the backing of the big recording studios, with their conventional distribution networks and links to DJs and radio stations. Indeed, as CD sales start to drift and profit margins narrow, the big recording companies are enjoying a hefty rise in profitable downloads.

This will mean change at music outlets such as HMV, which are dependent on CD and DVD sales. And it may be a case of back to the future. As a teenager growing up in Brighton, I found it a great source of pleasure to turn up at Lyon & Hall, a music shop on the main shopping drag, and listen to new releases in soundproofed booths.

These are now making an all-star reappearance at many music retailers. The punters arrive with MP3 player, check in to the booth to listen to Arcade Fire, like what they hear, and download it.

Certainly, these are testing times for the big record labels and music retailers - but this is in an industry that is used to remaking itself as technology and tastes change.

Alex Brummer is City editor of the Daily Mail