Once a respected titan in the music industry, Warner Music is now the third largest of the four majors, and rumors have long circulated that it may merge with the smallest, EMI. But a number of recent steps in the digital domain may yet vindicate Warner Music's new management.
ROBERT SIEGEL, host: Secretary of State Condoleezza Rice is another part of Asia, central      Asia. She's getting assurances that the US will have access to military      bases in that region.  The issue has been a sensitive one ever since      Uzbekistan ordered US troops out of a base that's been used in operations      in Afghanistan.  NPR's Michele Kelemen is traveling with the secretary.</s>MICHELE KELEMEN reporting: Secretary of State Rice started her tour of central Asia at the Manas Air      Base in Kyrgyzstan.  It's been an important logistical base for the      US-led war in Afghanistan, and Rice wanted to make sure the US continues      to have access to it.  She won a pledge from Kyrgyzstan's new president,      Kurmanbek Bakiyev, that the US can stay as long as military operations in      Afghanistan continue. Speaking through an interpreter, Bakiyev said      Kyrgyzstan and the US would decide the future of the base together.</s>President KURMANBEK BAKIYEV (Kyrgyzstan): (Through Translator) That is      the term of presence is directly tailored to the improvement of the      situation in Afghanistan.</s>KELEMEN: Kyrgyzstan has been under pressure from others in the      neighborhood, including China and Russia, to give the US a timetable to      leave.  The US officials say they were pleased to get Kyrgyzstan's      commitment in writing.  In return, US officials say they will review how      the payments are made.  Some here have alleged that much of the money      went to the son of Kyrgyzstan's ousted president, Askar Akayev.  The      ouster of Akayev six months ago, the so-called Tulip Revolution, was also      a key topic during the secretary's one-day stay.  Secretary Rice reached      out to democracy activists and members of a constitutional reform      council, even trying out a bit of her Russian.</s>Secretary CONDOLEEZZA RICE (State Department): (Russian spoken)</s>KELEMEN: Apologizing that her Russian was rusty, she switched to English      to make her case for democratic change in the former Soviet republic.      She hailed the recent presidential vote as the most free and fair      elections in the region's history.</s>Secretary CONDOLEEZZA RICE (State Department): I came here to Kyrgyzstan so that you might know that you      will have a steady friend in the United States who believes, too, in      democratic values and that as those democratic values take root here in      Kyrgyzstan, relations between the United States and Kyrgyzstan will only      grow.</s>KELEMEN: Even among the handpicked crowd listening to Rice, many had      their doubts about where the country's democratic revolution is heading.      Some described it as a mere coup.  And Balat Bakijoyev(ph), a businessman      and member of the constitutional council, said he's having trouble seeing      much of a difference in leadership styles between the ousted leader and      the newly elected Bakiyev.</s>Mr. BALAT BAKIJOYEV (Constitutional Council Member): (Foreign language      spoken)</s>KELEMEN: `Today I don't see any big difference,' he says, `though I      hoped there would be.'  An earnest young democratic activist, Edil      Baisalov, though, said he's not ready to give up on the Tulip Revolution      or the new president. Baisalov heads the Coalition for Democracy and      Civil Society and was pleased to hear Secretary Rice push for      constitutional reforms that would weaken the presidency.</s>Mr. EDIL BAISALOV (Coalition for Democracy and Civil Society): We know      that power corrupts, right?  And we have this absolute power here that      can corrupt anybody.  But we need to build such a system where there is      not one person who, you know, wields the democracy.  Democracy takes      people.</s>KELEMEN: Kyrgyzstan, he says, is in a difficult neighborhood and needs      US support.  Rice plans to push her democracy agenda in other former      Soviet republics, in Tajikistan and Kazakhstan, but first she plans to      visit Afghanistan and possibly Pakistan in the wake of last weekend's      devastating earthquake.  Michele Kelemen, NPR News, Bishkek, Kyrgyzstan.      ROBERT SIEGEL, host:</s>KELEMEN: From NPR News, this is ALL THINGS CONSIDERED.  I'm Robert Siegel.</s>MICHELE NORRIS, host: And I'm Michele Norris with the story of a major record label as it faces      a fast-changing music business.  After being absorbed by a giant media      conglomerate and spun off again, Warner Bros. is now the third-largest      record label.  And as NPR's Neda Ulaby reports, it's looking at the      digital domain as a key to its future.</s>MICHELE KELEMEN reporting: A band called The Sun has just released its debut album entirely on DVD.</s>ULABY: "Blame It on the Youth" is comprised of 14 music videos.  You      can't buy it on CD.  Warner Music expects you to play it on your      computer.</s>THE SUN: (Singing) I stopped to think about the bad times that I've had.      But the smile on my face ...(unintelligible).</s>ULABY: The band was signed three years ago.  The musicians became      frustrated by how long it was taking for their album to come out, so they      amused themselves by making videos with a friend in their hometown of      Columbus, Ohio. Warner was impressed by how many they produced on a small      budget, so the band proposed making one for each song.</s>Mr. SAM BROWN (The Sun): And they decided that they thought it was a      good idea and they found more money for us to finish up the videos so we      could get them done in time for this fall release.</s>ULABY: Sam Brown is The Sun's drummer.  He also writes some of the      band's songs.</s>Mr. SAM BROWN (The Sun): Being on a major label you have access to, you know, a little      bit more money than you would if you were just making videos on your own.      So it definitely made it possible for us to, you know, make 14 videos.</s>ULABY: Brown says those 14 videos cost about $50,000.  That's a fraction      of what it might take to make one video for a star.  The Sun's DVD was a      cheap experiment for Warner Music at a time when the company is trying to      reinvent itself.  The label began in the late 1950s as a way for a major      Hollywood studio to showcase the musical aspirations of stars like Tab      Hunter.</s>Mr. TAB HUNTER: (Singing) Jealous heart, oh, jealous heart, stop      beating.</s>ULABY: It took a while for Warner Bros. Records to hit its stride, but      by the 1970s Warner had built a reputation as the most artist-friendly of      the big labels, and its roster ranged from Frank Zappa and Jimi Hendrix      to James Taylor and Fleetwood Mac.</s>FLEETWOOD MAC: (Singing) All your life you've never seen a woman taken      by the wind.</s>ULABY: By the 1980s Warner had absorbed such well-respected labels as      Atlantic, Elektra, Asylum and Sire.  Its artists included R.E.M., Madonna      and Prince.  Warner executives Mo Ostin and Lenny Waronker were among the      most powerful in the business.  Then Warner Communications merged with      Time Incorporated in 1989, which merged again about a decade later with      AOL.  A wave of consolidation overtook the music industry.  After the      dust settled, two labels, Universal and Sony BMG, controlled the majority      of domestic music sales.  So last year AOL Time Warner spun off its once      vaunted music division.</s>Mr. ARAM SINNREICH (Radar Research): They were basically dead weight      inside of the Time Warner corporate edifice.</s>ULABY: Aram Sinnreich co-founded Radar Research, a firm that analyzes      media and technology.  He says Warner's new owners, a group of investors      led by Seagram's heir Edgar Bronfman Jr., faced a challenge.</s>Mr. ARAM SINNREICH (Radar Research): He's a young guy with new ideas and a big ego and wants      to run a record label, and that's part of what motivated him, but      actually does care about music as a product, even though he comes from a      liquor background, gets together his friends and buys the label off of      this fat-cat corporate entity. They slice costs.  They fire a bunch of      people.  They fire a bunch of artists, terminate their contract, cut it      down to like just bare nothing, start to stabilize the blood flow.  And      then they announce all these digital initiatives and are really trying to      kind of reinvent what a record label is. I mean, that's the arc of the      music industry right there in that story.</s>ULABY: Warner Music made a public stock offering last spring and paid      off its investors.  This upset some of the label's artists.  The band      Linkin Park accused the company of putting money before music.</s>Mr. BISHOP CHEEN (Analyst, Wachovia): That's to be expected.</s>ULABY: Bishop Cheen is an analyst with Wachovia.</s>Mr. BISHOP CHEEN (Analyst, Wachovia): Name an industry where there's not a lot of friction, where      there's a lot of dollars.</s>ULABY: And Warner Music is spending them in the digital domain.  The      company has announced a deal with MTV to put videos on cell phones.  It's      launched a wireless streaming music subscription service, and it recently      named a top executive to handle digital legal affairs.  Those are the      choppy waters of copyright and proprietary technology that have caused      the music industry to founder online.  Warner Music also lured a      legendary record executive out of retirement who bluntly questions the      industry's approach to matters such as file sharing.</s>Mr. JAC HOLZMAN (Cordless Music): I understand that you don't want      people stealing your music, but at the same time I think we could have      recognized that the Internet was an important force and used it ethically      and to great effect.</s>ULABY: Jac Holzman founded Elektra Records in 1950 as an independent      folk music label.  He went on to launch the careers of Judy Collins and      The Doors. Now at 74 years of age, he's launching a new online only      e-label for Warner Music.</s>Mr. JAC HOLZMAN (Cordless Music): When I started to design the e-label, I tried to block out      all of my past experience.  But there were certain lessons from the past      that became very clear to me:  the frequency of interaction between an      artist and their fan base by continual release of records, keeping the      costs low, having a methodology of releasing that would let us use our      medium to introduce our material to people.</s>ULABY: Cordless Records won't feature big names from the Warner catalog.</s>JIHAD JERRY AND THE EVILDOERS: (Singing) You're 35, two kids,      (unintelligible) but I don't care.</s>ULABY: Jihad Jerry and The Evildoers is fronted by a founding member of      the band Devo.  Cordless will concentrate on newer artists, releasing      their music in what Holzman calls clusters of three songs.  And when it      comes to certain industry norms long despised by musicians, Holzman      promises change.</s>Mr. JAC HOLZMAN (Cordless Music): The fundamentals of the Cordless agreement is that the      total contract length if we exercise all of our options and if the      clusters are delivered on time is 21 months.  The artists own their      masters and if they publish with Warner/Chappell, they own their      copyrights.</s>ULABY: Another convention Cordless may challenge is the industry's      wisdom on hits.  Analyst Bishop Cheen.</s>Mr. BISHOP CHEEN (Analyst, Wachovia): This is a business where you can leverage an entire label off      of one hit.</s>ULABY: But that's been less true so far with online music.  Jac Holzman      says he's not even thinking about hits.</s>Mr. JAC HOLZMAN (Cordless Music): There is no hit model.  There's only good music, and if it      catches on, maybe it becomes a hit.  But I don't know what a hit is for      an e-label.  I don't know what those metrics mean yet.  We will find out      over time.</s>ULABY: Warner Music's CEO, Edgar Bronfman Jr., told a recent conference      the industry's paradigms are changing.  Digital revenues now account for      6 percent of his company's business.  And in the wake of several fights      with artists over royalties, Bronfman hinted support for a new open      standard for managing digital rights, one that foregoes royalties      altogether.  Neda Ulaby, NPR News.</s>ROBERT SIEGEL, host: You're listening to ALL THINGS CONSIDERED from NPR News.