Todd Martens, on his LA Times Extended Play blog, has one of the smartest articles I’ve seen recently on the music industry: He tracks the decline in the price—or value if you prefer—of the record album or CD.

“Less than 10 years ago,” he notes “it was common for albums to cost $15 and above.” And today, he says, Amazon is now running specials on old Coldplay albums and selling them in download form… for $1.99! (Link via The Daily Swarm.)

(He even notes that the service has already been trying to unload Madonna’s newest at $3.99.)

His mini-history, a must read, calls attention to an often overlooked aspect of the trouble the record biz is in: Not only are consumers buying fewer CDs; they are paying a lot less for the ones they do buy.

Martens reviews the so-called MAP program of the 1990s, which was essentially a price-fixing program the labels enforced on retail stores. Once the FTC started to look into this, the labels backed down. That opened the door for the big box retailers to start using CDs as loss leaders, which was the first, crippling shot at the foundations of the nation’s traditional record store infrastructure, and ultimately saw the closing of everything from hundreds, if not thousands, of neighborhood stores to, in the end, mighty Tower.

But it opened up the era of the $9.99 CD, with $7.99 for new releases not infrequent these days.

(The MAP program, in turn, reminds us again that the record industry’s traditional way of doing business was based on three legs of, basically, criminality: Pay radio stations to play your music, price-fix to keep prices up at retail, and then screw the artists by not paying royalties on the back end.)

You can read all of this and feel a little bit sorry for the labels, I suppose. But you have to think back to those corporations’ salad days—the 1970s, 1980s, and 1990s, where list prices would go up a dollar every year or two, lead by so-called superstar releases. For those big albums, the labels would jack up the wholesale price 50 cents or a dollar, on the (correct) assumption that fans desperate for the new release by their faves would swallow the increase. The came the CD era, which basically doubled the cost of albums overnight, and the vast majority of the sales coming from the catalog.

It was kinda like free money, but also kinda like crack. So when the digital era, in turn, came around, you cold hardly blame the labels for being unable to visualize a world in which they couldn’t slap an $18.98 sticker on a CD and make their customers like it.

A long, very weird story in the NYT about Guy Hands, chief of EMI, whose antics since his firm bought the fabled label have been watched with dismay in the industry. Little in the story makes one optimistic about the label’s future.

I say “weird” because it’s full of both interesting tidbits and discordant notes.

For the latter, after mentioning the Beatles, it describes the label’s artist history thusly: “Frank Sinatra, the Rolling Stones and Marvin Gaye have all called EMI home.” It’s fair to mention Sinatra, who was of course on Capitol, part of EMI; the Stones have been on the label since EMI took over Virgin ten or fifteen years ago, but the few albums the band released under its aegis—winners like Bridges to Babylon—aren’t very memorable. (The story also mentions the Stones’ back catalog, but of course EMI didn’t release it originally, and the Stones aren’t a particularly big catalog seller.) I don’t understand the reference to Marvin Gaye, who I thought spent his career on Motown and Columbia, at least in the U.S. You’d think a story about EMI would mention the artists that actually sold some records for it, like the Beach Boys, Paul McCartney, Pink Floyd and, I don’t know, Garth Brooks?

Anyway, some of the tidbits:

The company now wobbles under a huge debt load, a leadership vacuum—it has no chief executive and most major decisions are made by Mr. Hands—and low morale among many of its employees. Mr. Hands said about 80 percent of the $6.4 billion paid for EMI was for the music publishing unit, which owns copyrights and provides a steady flow of cash.

It is the other side of the business, recorded music, that he says he overpaid for, and could wind up selling if market conditions do not improve.

This I assume increases the likelihood that Warner and EMI will ultimately find their destiny together; indeed, later the story details some complex financial details, concluding that Citigroup, which funded Hands’ takeover, might ultimately force the long-awaited merger with Warner.

The story has even turned comical at times. After Mr. Hands discovered that some employees were laundering costs for things that were illegal (drugs and prostitutes, he said), by itemizing them on expense reports as “fruit and flowers,” he set a strict travel and entertainment policy that required receipts for every expense.

One is tempted to snicker that he was shocked, shocked to discover there was gambling in Casablanca, but this is an interesting aside. Payola is on the outs now in the industry. (The labels can’t really afford it any more.) The story doesn’t say if EMI before Hands bought it was a holdout in this area, whether the, ah, “promotional material” was for radio or retail, or whether the activity took place in the U.S. or the U.K.

Some bleak figures:

[…A]ccording to Mr. Hands, the company was doing worse than commonly thought. An analysis by McKinsey and KPMG found that EMI had lost £750 million ($1.5 billion) from selling new music over the last five years.

“We didn’t believe it at first,” he said, explaining that the figures that EMI previously reported counted sales of re-releases of music from old acts like the Beatles as new music revenue.

“They were doing everything they could to hide the fact that they were losing huge amounts of money in new music,” he said.

All of the major labels are having problems, but amid everything else, EMI’s U.S. market share has dropped nearly 20 percent, the story says. And what would an industry story be without some over-optimistic forecasts?:

[Hand’s company] projected that EMI’s earnings before interest, taxes, depreciation and amortization [Ebitda] would grow from £167 million ($325 million) in 2007 to £580 million ($1.1 billion) in 2010, growth that seems at odds with industry trends. (Merrill Lynch, for example, projects that the Ebitda of Warner Music will decline slightly over that time, from $461 million to $444 million.)

Also in the Times today, Jeff Leeds looks at Grammy preparations, leding with the travails of Amy Winehouse. The story vouchsafes that Winehouse is “troubled” but primly doesn’t say what most people would, which is that Winehouse is too busy drinking and drugging herself to death to play a club gig, much less get her ass on a plane and rehearse and pull off a performance on live TV. (Her most recent filmed appearance was a video that supposedly shows her smoking crack.)

Leeds is a smart guy, and he is presumably more in touch with what’s going on at the Grammys than I am, but is it really true that Winehouse “was expected to be the dominant figure at the 50th annual awards ceremony”? When was the last time a contemporaneously artistically vibrant figure was dominant at the Grammys?*

Too much of this article blithely accepts both the Grammys as a whole and anything its organizers say at face value. For example:

Mr. Ehrlich said he faced an added challenge this year, in that the nominees in the major categories did not necessarily intersect with the roster of the last few decades’ most well-known stars. (Bruce Springsteen’s album “Magic” had been seen as a likely album of the year contender but failed to draw a nomination.)

“Even 5 or 10 years ago there were 15 or 20 names that were universal,” Mr. Ehrlich said. Today, he added, “there are a great number of extremely popular acts, great live acts, but I don’t know that we have that same number of what we used to call one-name acts.”

First, the “added challenge” Ehrlich talks about is of course a perennial one; how to deal with the unavoidable fact that the woolyheaded NARAS membership is out of touch with music, both commercially and critically speaking. Second, NARAS has a way of dealing with this “challenge”: it has a secret committee that is empowered to tweak the nominations list to get more commercially appealing artists onto the show, so it will get higher ratings. Isn’t that’s NARAS’s primary concern?

The article ends with a passage that might have come out of the Onion, except that it’s more in the realm of the “unfunny preposterous,” rather than “funny preposterous”:

The academy has also rolled out an upmarket fashion line, with belts, jackets and other apparel, that will be sold at boutique retail stores.

The clothing line and other recent promotions reflect “a watershed moment for us,” said Evan Greene, chief marketing officer for the academy. “It’s really a tremendous opportunity for us to sort of direct how our brand is perceived moving forward. Where brands get themselves in trouble, especially brands in a leadership position, is where they start to get comfortable.”

Hey—I’ll trade you my Christopher Cross belt buckle for your Starland Vocal Band tour jacket! Oh yeah? Well, I have a Shelby Lynne baseball cap. Inside, it has some interesting “artist facts”! Did you know that she won a “best new artist” Grammy in 2001, even though she’d been releasing albums for a dozen years and had had a hit single back in 1988?

* Okay, friendo: It was Outkast, a couple of years ago. One of the interesting random weirdnesses about the Grammys is that it has arguably been relatively—I said relatively—perceptive about black music. The organization seems somehow more in tune with black pop than any other form of popular music. Stevie Wonder’s dominance in the 1970s is the best evidence of this, though more recent “album of the year” wins by Lauryn Hill and Outkast count as well. (Let’s leave Natalie Cole out of it. A lot of the Grammy awards in the 1970s, for some reason, were quite defensible. They never quite recognized the most vital recordings of the time, but they weren’t, year in and year out, the morass of absurdities and ephemera they have been in the years since.) Winehouse’s dizzying mastery of a tricked-out classic R&B sound might conceivably fall into this pattern, but beside the fact that it’s hard to imagine NARAS giving a major award to someone who might be dead of an overdose before the ceremony, if Winehouse were to win album of the year it would be by far the most radical award in the organization’s history.

The digital convergence has decimated the music industry, caused a strike in the movie industry, got the Library of Congress embroiled in a controversy over setting outrageous (and later overturned) royalty rates for internet radio, and allowed the music industry to wage war on its customers in the form of the lawsuits against illegal downloading.

It’s clear at this point that no one is going to get out of this transition clean. The latest fault line: The so-called mechanical royalties songwriters get for their work. Right now, songwriters get paid in a couple of complicated ways. One is the small amount—roughly nine cents, in theory—for each track on a CD that’s sold. The also get some other small amount, which varies in the five- to eight-cent range, each time a song they’ve written gets played on the radio.

(This is in contrast to the royalties the performer of a song on a particular record gets. The artists have a separate deal for royalties with the label releasing the records, and get no money for radio play, the idea being the radio play gives the artists free publicity.)

Anyway, on the mechanical royalties front, the Library of Congress, a board of which oversees royalties, is considering a couple of new proposals. In one, the music industry wants to lower the royalty rate for digital downloads. In this effort, they are joined by a new major player, the Digital Media Association, which includes companies like Apple and Amazon and Microsoft. (A full list of its members is here.)

A Hollywood Reporter story on the issue is here.

The music publishing industry, which represents songwriters, says the rate should be increased, on the grounds that the labels are making more proportionally off each download, because they don’t have to manufacture and package the music.

The figures debated are complicated and don’t quite make for apples-to-apples comparisons. The nine-cents-per-track CD rate is just nominal; the various ways record companies manipulate contracts and manhandle new artists in contract negotiations often produce much lower rates in practice.

Right now, the record industry wants an 8 percent royalty on gross revenues from downloading. Since, last I heard, the prevailing 99-cent iTunes purchase gives about 65 cents to a record company, that’s a ostensible royalty rate of a little over five cents per track.

The second issue before the copyright board is how to compensate songwriters for digital streaming. This gets down to a distinction that has bedeviled the royalty issue since the practice began. It’s pretty clear that when you buy a song from the iTunes store, it’s a purchase, just one lacking the physical dimension of a compact disc. But what’s exactly happening when you stream a song, though a subscription service? Is that a sale, triggering royalties–or a performance, which doesn’t?

The Digital Media Association, or DiMA, as it calls itself, unsurprisingly paints a picture of a delicate, fragile industry that make get killed a-bornin’ if royalty rates are too high:

“Fundamentally, this fragile marketplace is showing signs of promise, but it cannot be saddled with additional, excessive costs,” DiMA wrote. “The board should be careful not to impose a royalty that kills the proverbial goose and deprives songwriters and publishers of their golden egg.”

How other manifestations of the digital world will affect the real-world incomes of songwriters remains to be seen. For one, songwriter income from hit singles alone should rocket upwards. Music fans, instead of having to buy albums to get the one song they like, are now free to buy just the song for a quick and easy 99 cents. On the other hand, those tens of millions of album purchases now foregone will cost the songwriters who traditionally piggy-backed on the popularity of a hit song or two will now vaporize.

The Chicago Reader recently opened up its archives. I went hunting for one of my favorite Reader stories, written by Josh Goldfein a few years after I stopped working there, which I don’t think got enough attention when it came out. Perhaps not all that relevant today, it nonetheless functions as a sobering coda to the indie-rock era, whose idealism and discontents colored the debate of the time.

While the story is very nuanced, it basically details what happens when, after a label-band handshake relationship of many years standing, one of the parties figures out it can make a lot more money by abrogating the deal—which, as it turns out, wasn’t worth the paper it was printed on.

A shorter follow-up article is here.