I have a question for you: why do we need record companies anymore? What useful purpose do they serve? I suspect that unless you are someone who works for a record company, you won’t have an answer to this question. Because this is 2007 and the big record companies are dinosaurs of the 20th century, slowly lumbering along towards extinction.

Fifty years ago when record companies actually went out to discover and nurture artists, built decades-long careers and owned the sole means of distribution, they were useful. But today, a new artist can record a hit song in his or her bedroom using a PC, upload the results to MySpace, sit back and have a global hit within days.

Let’s examine the current status of two very talented global stars. The first is my own personal rock god, Bruce Springsteen. Bruce has a new album coming out in October. It’s been twenty years since his glory days, so he may be able to sell a million copies of this album in the US. Columbia Records, owned by Sony, will perhaps give him a royalty of US$2 for each compact disc sold. So he can expect to earn US$2 million from CD sales. I think it’s fair to say he’s reached a point in his existence where $2 million is not a life-changing amount. (Dear Buddha, how I wish I could say the same!)

On the other hand, his upcoming World Tour (odd how his ‘world’ doesn’t seem to include Asia) will probably gross upwards of US$50 million, and at least 90% of that will go to him. On top of that he will gross millions more from associated merchandising sales (T-shirts; hats; Born to Run laxatives; Darkness on the Edge of Town flashlights; The Wild, The Innocent & the E Street GPS units). So the question becomes, why does he need a record deal with Columbia? What does he get from it?

On the other hand, someone who really seems to get it is Prince. Like so many young men before him, he was so eager for a record deal when he was young that he sold his soul. And when he grew up, he discovered that he didn’t own the art that he had created. He pulled some debatably wacky moves for which he got demonized by the record companies and the media. But today, he’s very much his own man and others are starting to realize that he’s setting an example for artists to follow.

He understands that he makes a lot more money from ticket sales than CDs. So he started giving away his latest album to everyone who bought a concert ticket. Assuming someone paid $100 for a ticket and it cost a buck or two to make the CD, it didn’t cost him very much to get his music into the hands of his fans – and since in some odd fashion it was considered a sale, he ended up with his highest chart positions in Billboard in years.

Even better was his recent deal to have a British newspaper give away a copy of his latest album with their paper. While the financial details of this arrangement have not been made public, one can safely assume this was a win for everyone – Prince, for the money paid to him and for getting his music widely distributed; the fans, who got the CD for free; the newspaper for the publicity it generated. Oddly enough, the only people to complain about this were the record companies and the record shops, the two entities that were shut out of this process.

Let’s face it; the greed of the big record companies is legendary. In the early days they paid off artists with a US$10 bill, a bottle of whiskey and a hooker, and record company executives put themselves down as co-writers of hit singles to pocket extra chunks of royalties. Someone needs to explain to me why a top-selling DVD in 2007 costs almost two-thirds less than in 2001, while the list price of new-release CDs has gone up instead of down over the past 25 years.

And someone needs to explain to me why record companies are attacking their customers by releasing CDs with Digital Rights Management software embedded that contains spyware and viruses. And, if every survey shows that people who download the most are also the people who spend the most money on legitimate CD purchases, why are the record companies suing their best customers?

The record companies had every opportunity to embrace new technology and lead the way into the future. But they chose to hang on to the past. They thought the CD was forever and underestimated the power of the internet. The result is that their profits are falling through the floor, they’re blaming everyone but themselves, and attempting to use legislation around the world to hold on to the sand slipping through their fingers.

My jaw is dropping watching the fighting right now between NBC/Universal and Apple’s iTunes. In less than five years, iTunes has become the No 1 distributor of digital music in 21 countries and the No 3 music seller of any type in the United States. The answer is simple: Apple gets it. What they’re doing isn’t perfect by any means but clearly they’ve come up with a model that works for consumers. Apparently whatever Universal receives from the US.99 cents per song/US$1.99 per TV episode arrangement isn’t enough for them. So they’re pulling all their product away from the largest digital distributor on the planet.

Granted, I don’t think that Apple is any angel. The fact that they still don’t have a Hong Kong iTunes store is a major annoyance. The DRM on most of their offerings is anti-consumer. The various legitimate digital choices in Hong Kong don’t offer English language interfaces nor should any single distributor have exclusive rights on iTunes’ scale. Brick and mortar stores don’t get these exclusives, why should a digital store? This will change, given time.

Okay, as an old-timer collector, I have to admit to a preference for buying atoms (CDs) rather than bits (digital downloads). If I had again every penny I’ve spent on vinyl and CDs I could have a beach house in Phuket to rival Allan Zeman’s. But I also realize that the first thing I do when I buy a new CD is rip it to MP3 and then file the physical disc away on a shelf. So I can live in a digital-only world. But can the record companies? If you answered yes to that question, can I please have some of whatever it is you’re smoking?