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If you are a noname, nobody band, you need a label to get known.

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Indeed. Seven years ago musicians derived two-thirds of their income, via record labels, from pre-recorded music, with the other one-third coming from concert tours, merchandise and endorsements, according to the Music Managers Forum, a trade group in London. But today those proportions have been reversed—cutting the labels off from the industry's biggest and fastest-growing sources of revenue. Concert-ticket sales in North America alone increased from $1.7 billion in 2000 to over $3.1 billion last year, according to Pollstar, a trade magazine.

Frustrated record companies have responded by trying to get their artists to spend more time promoting records and less time touring and endorsing products, says Jeanne Meyer of EMI, another big record label. “Sometimes you've got a tug of war going on,” she says. Yet the more labels spend on marketing pre-recorded music, the more they raise their artists' profiles and boost their other, more lucrative, sources of income. Pre-recorded music, no longer the main cash cow, increasingly serves merely as a marketing tool for T-shirts and concert tickets. The best seats for The Police's world tour this summer cost over $900; the group's entire catalogue on CD costs less than $100.

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A new group typically gets only 14% of a CD's wholesale price, and even that cut dwindles to a third of that once the company deducts promotional fees. . . Performers frequently moan about never seeing a royalty check from their record label, no matter how many discs they sell. But a top concert draw can take home 35% of the night's gate and up to 50% of the dollar flow from merchandise sold at the show. The labels get none of it.

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