Nine Inch Nails are giving away their newest album titled, The Slip, on their website. There is no gimmick. There are no strings attached. Simply go to their website and download the album free and clear. Hell, you even get to choose the quality and the format you want it in (i.e. mp3, m4a lossless, FLAC, and hi-definition WAVE 24/96).

Why would a band like NIN do this? First, they got rid of their record label. You don’t think Universal, their previous label owner, would allow this do you? Second, NIN understands that selling records is now a very tiny piece of the puzzle. Instead of trying to futilely retain control by cracking down on file-sharing and preventing your music from being played in online radio and podcasts (like most majors do), NIN has embraced the shifting technological paradigm.

Other major artists are doing like-minded things like this. Madonna recently left her longtime record contract with Warner Bros. in favor of signing with Live Nation - a concert promoter. Why would she do that? More on that in a minute. Coldplay is also testing the free-song-download model this week by offering their new single called “Violet Hill” from their website. Better move fast - after this week it goes away.

We’re looking at a fundamental shift in the music business. The recorded product is now the bait and not the fish. By giving away the product for free, artists are doing two things. First, they get to collect your email address. This is very valuable because they now have a way to interact with their fans and tell you about other things you maybe interested in. That leads me to number two: Concerts and merchandise. I get emails all the time from my favorite artists telling me about when they’re playing near me and about new fan items they have available. So, instead of getting $10 out of me for a digital download on iTunes, they potentially get $100 or $150 out of me in the form of concert tickets and merchandise. Plus, the goodwill generated by an artist giving away their latest recording (as opposed to getting a lawsuit notice from their record company) doesn’t hurt their public image any.

This brings me back to Madonna and the deal with Live Nation. She’s essentially brought her career under one roof. Live Nation already promotes your shows and sells your merchandise, why not have them facilitate the release of your music? At this point what does a record company really bring to the table?

Need another example? Bret Michaels has been all over your TV lately as the star of the VH1 show, Rock of Love. His band, Poison, once 80’s superstars have been seen a nostalgia act for the last 10 years. I would argue that they are doing as well as ever. Sure, they haven’t had a radio hit in more than 15 years, but does that really matter anymore? Each summer for the last few years they embark on a 40-city tour. They play to venues that average about 5000 people - and they sell them out. Let’s say the average ticket price is $50 - that’s $250,000 per show, or $10 million for 40 cities. I know that some of that goes towards paying for touring costs, staffing, venues and such, but still, it’s not a bad summer’s work. Considering the average recording artist makes a paltry $1 for every unit sold, there’s no reason for Poison to release a new album when the lion’s share of their income comes from merchandising and live performance, not new releases.

My guess is that record companies will continue to kick and scream over new technology. They’ll continue to bemoan their declining revenues and blame it on piracy. But, if artists as big as Madonna, Nine Inch Nails, and Coldplay are testing these waters, clearly there is a change in the tide.