The Future of Recorded Music - Part 2

Just a week before the May 9 release of their two-CD set Stadium Arcadium, the Red Hot Chili Peppers found that the whole album had been leaked to the Internet, letting fans download it free from file-sharing sites. These days, of course, leaks are hardly novel - but the reaction of the band's bass player, Flea, was. On the band's Web site, he bemoaned not the possibility of lost sales, but the poor sound quality of the leaked version, saying fans would be hearing "a pale imitation" of the real recording.

Some fans questioned Flea's motives; after all, the Chili Peppers recently abandoned their "no-iTunes" policy, allowing their albums to be bought in compressed file formats. But his comments underscore the fact that as downloads start to replace CD sales, artists face myriad changes from both creative and business perspectives.

Track 1: Slipped Discs

Already several years in the making, the shift toward downloads has been gradual, in large measure because of the major record labels' initial reluctance to embrace it. Thanks to the success of portable music players (okay - Apple's iPod) and legal online music services (okay - Apple's iTunes, but also Napster, AOL Music Now, Sony Connect, Yahoo Music, and soon, MTV's Urge), online digital music sales are growing exponentially, while CD sales are slowing. Still, no one expects CDs to be replaced any time soon.

"We are clearly shifting to a digital-delivery environment, but it will take a little while to get there," says Thomas Hesse, president of Global Digital Business at Sony BMG Music Entertainment. "But it's realistic to assume that in five years, we'll be in the realm of 50% digital distribution."

Many artists are already seeing the handwriting on the wall. Ari Hest, for example, who'll release his second album for Columbia this fall, says the demise of the CD will come sooner than he initially thought. "If you asked me a couple of years ago, I would have said it would take another decade, but I don't think so anymore. It's becoming more frequent for everybody I know to get their music from iTunes and avoid CDs altogether."